What is Venmo?
If you have ever visited a restaurant or bar with your friends and got stuck with paying the entire bill or tab, you know the struggle of asking them to pay you back. Asking your friends to reimburse you can be a never-ending struggle, but not anymore. Enter Venmo, a mobile app you can connect to your bank account and social media accounts to exchange money. The app allows users to have a digital wallet connected to the money in their bank account. Using Venmo does not cost anything, unless you decide to use a credit card. If you use a credit card, you are required to cover the 3% transaction fee. The app, used mostly by millennials, eliminates the need to use an ATM or wait around for checks to be deposited. While some youngsters were hesitant to start using the app because it seemed “sketchy,” they regularly use the app now.
Venmo as a Social Media
Not only does Venmo serve as a digital wallet, it doubles as a social network. Every time a user makes a payment to a friend, they can summarize what the reimbursement was for and post it on Facebook, Twitter, or any other social media sites. This allows Venmo to be more communicable for its users. Many users say they enjoy seeing what’s going on with their friends. One user said, “I wouldn’t scroll through Venmo just for kicks. But when I’m there, making a charge or a pay request, I like to check out what’s going on. People are kind of entertaining. Everyone wants to be creative and sarcastic. It can be pretty funny.” More and more people across America are turning to Venmo to settle their payments. While Venmo did not want to disclose the number of users they had, they did say that the company processed $700 million in payment in the third quarter of 2014. This number is only expected to rise as more people are asking their friends to “Venmo them” instead of paying them in cash.
The History of Venmo
Venmo was founded by two friends, Andrew Kortina and Iqram Magdon-Ismail, both graduates of the University of Pennsylvania. After college, both friends worked at startup companies, but knew they eventually wanted to start their own business. Venmo was born when Magdon-Ismail went to New York to visit Kortina and forgot his wallet. By the end of the trip, Magdon-Ismail owed Kortina $200. Both friends knew there had to be a better way for Magon-Ismail to pay Kortina back without the hassle of depositing checks. This is when Venmo was born. In the early stages of Venmo, users were able to use text messaging to send payments and write a short message. However, the founders knew they wanted to switch to a mobile app. The startup raised over $5 million in its first years and was successful until it had its first major crisis. Many of Venmo’s early users were using their credit cards to make payments and Venmo was covering the 3% transaction fee. This was costing the company too much money and profit. When Venmo made users pay the fee, their sales plummeted. With cashing running low, the founders decided to go to Braintree for help. Braintree ended up acquiring Venmo for $26.2 million. Venmo now makes money by charging merchants, who pay a fee every time a Venmo user complete a purchase order.
The Rise of Mobile Payments
Many futurists have been predicting the end of cash, credit cards, and checkbooks. A 2013 study predicted that Americans would use mobile payments to spend about $90 billion in 2017. Due to Venmo and the rise of mobile payment, this number has increased to $12.8 billion. Mobile payments are becoming the mainstream and merchants are attempting to get in on the action. There are more than 1,400 digital-payments-related startups. Apple Pay, Android Pay, and Snapcash are just a few examples. Venmo believes their app is a great way to get consumers comfortable with using their phones to make payments. The future of mobile payments seems to be very bright.
Source referenced: Bloomberg Businessweek