PayPal reported their fourth quarter and full year results yesterday. I pay close attention to the Venmo numbers to get a sense of the growth of their person to person (P2P) solution, Venmo, and its contribution to the greater P2P market. Venmo was truly a bright spot in their earnings announcement. Some of the numbers:
- $19 billion in processed volume was conducted on the Venmo product in fourth quarter, representing 80% growth over fourth quarter 2017.
- $62 billion in processed volume was conducted on the Venmo product for the year, representing 79% growth over the full year 2017.
Yes, the growth rates are slowing as the product matures, but these are tremendous stats.
This announcement really points out, however, that Venmo can no longer be compared to other P2P products like Zelle and probably shouldn’t even be called a P2P solution. It’s not just a mechanism for moving money from one individual to another or one account to another. Within all of that reported processed volume are also payment transactions through the Venmo card and through apps like the ability to use Venmo to pay for Uber rides.
Turning Venmo transactions, which on their own are a net loss, into revenue generating activities has been a focus. By allowing Venmo to be used to make purchases and charging merchants acceptance fees, plus charging consumers for “instant” cash-outs of their Venmo balances into a bank account is now generating over $200M in revenue. That revenue is evenly split between the two activities. As an article in Digital Transactions points out, despite that impressive revenue growth, Venmo is still not yet profitable:
The knock on Venmo has been that it’s free to users, so costs ratchet up with volume with no compensating revenue. But Schulman said the service ended the year with a $200-million “run rate” in annual revenue as it began tapping acceptance fees from both online and physical merchants and also took in fees from consumers for instant transfers. Indeed, Venmo is “getting into everyday spend,” said Ready, through the Venmo card and Pay with Venmo programs.
All told, some 29% of Venmo users made a “monetizable” transaction last year, said Schulman. But, in response to a question from an analyst, chief financial officer John Rainey cautioned Venmo “is not in the black yet.” The first step, he said, was to stop the growth in losses as volume grew. “We’ve done that,” he added, and now, “the second step is to break