Venmo users—rejoice. PayPal looks to expand its popular Venmo platform into a new mobile payment method called Pay with Venmo. According to the following article, the company said this will enable Venmo users to buy goods and services from PayPal merchants who agree to accept the new payment alternative.
Venmo, PayPal’s social payments platform that’s popular with millennials, processed more than $6.8 billion in total payment volume, an approximate 114% increase year over year. Even more exciting, the company finally announced it would begin rolling out Pay with Venmo, the app that allows users to make purchases through the platform. While Venmo is heavily used for peer-to-peer payments, PayPal makes little money on these types of transactions. Having the platform used by consumers to make mobile or point-of-sale purchases, however, means PayPal might finally begin to see revenue and earnings growth driven by Venmo. PayPal’s management has referenced One Touch numerous times while talking about Pay with Venmo’s debut. As PayPal’s leadership has made known several times, One Touch was PayPal’s most successful launch ever. By the end of the first quarter, more than 53 million consumers and over 5 million merchants had opted into the program, which lets people stay logged in and thus check out and pay without resigning in.
One of the factors that Schulman and others in PayPal leadership believe significantly contributed to this successful launch is that it requires no effort on the part of merchants to accept the new platform. This means that PayPal won’t have to approach individual retailers about incorporating Venmo into their checkout processes. Because PayPal is able to build Pay with Venmo on top of its core infrastructure, merchants who currently accept PayPal will be able to automatically accept Venmo as well. PayPal has always taken a measured and disciplined approach to monetizing Venmo. Management doesn’t want to ruin the user experience that has given it a cult-like following on college campuses across the country.
PayPal has a dedicated market segment of enthusiastic millennials for whom Venmo has become a way of life. So why not tap into their growing buying power and enable them to make mobile payments for goods and services sold by PayPal merchants? Whether this will cannibalize the existing base of PayPal users remains to be seen. But it seems that by targeting Venmo customers, PayPal will pick up a significant net gain in payment transactions, from which they will get of piece of the processing fees.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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