How does Venmo make money?

How much do you carry around in your wallet? OOPS!! Sorry, it’s rude to ask someone about their money. But the reason for asking that is do you still go around carrying hard cash? Nope, right. Thanks to the advanced technology and the evolution of the online payments system people are not carrying too much cash around, instead, they’re paying through their online wallets or payments apps.

Times have truly changed and this change is really welcomed by people. This can be considered a revolutionary idea. No more worrying about misplacing wallet around and losing money. Having a mobile is just enough, be it for ordering food or booking movie tickets you can finish any task you want with it. You don’t have to worry about paying your bills by standing in line for hours as you can simply pay them from your phone. 

You can even transfer money to your friends online. It is not an exaggeration to say that mobiles are now serving as wallets too. Especially for millennials, Venmo has become quite popular among millennials for doing just that. If you’re someone who sends or receives money electronically then you must have heard about this app or you must be already using this app. 

Their Just Venmo me phrase has truly become quite popular and has become a synonym for receiving me. But have you wondered how this app actually earns money? If you have then stick till the end of this article to find out.

But first, let’s start from the beginning and learn how and when this company started.

From the beginning 

This app is a mobile application (free) that has simplified the money transfers between people and businesses. The twist is that people can transfer money along with social networking. This platform is the perfect mix of both social networking and money transferring wallet. With this application you can send money to others, request money, pay merchants online or offline, split bills, share to the world where you’re spending money with others and see where they’re spending there.  

It was started back in 2009, two friends Iqram Magdon-Ismail & Andrew Kortina while they were studying at the University of Pennsylvania. At first, this was started as a service that people can transfer money through texts. But however, over time it has evolved. It was not available to the public till 2012, this app was released for both android and iPhone users to use. This service primarily capitalized by allowing the people to connect bank accounts and credit cards to Venmo so that they can receive and send money from their mobile. 

If users wanted to send money (free) they must connect the bank account with Venmo. In case you want to send money with a credit card then a small transaction fee is charged. One can consider this as one of the most clever business models ever created for millennials. 

Venmo’s worth & how it works?

However, in 2012, Braintree acquired this application for $26 million, which was ultimately acquired by Paypal in 2013 for around $800 million. So Venmo now operates under the leadership of PayPal. It is reported by Paypal that Venmo has around 40 million users. 

You can say that the reason why it became so popular is that it has solved the issues of money transfer for the current generation. From splitting bills to transferring money millennials can perform transactions easily. Millennials can now easily split bills or send their monthly expenses to their roommate. They can even buy from their merchants online and offline.

How does it work?

It is quite simple, all you have to do is sign-up or create an account by linking it to your email id or phone number. Once you have created an account, you can pay anyone with its available sources i.e., bank account (U.S), credit card, debit card, Venmo balance (e-wallet). You can send money or receive it in a few clicks. Along with that you can even see others’ feeds, like, comment too. 

This brings us to the initial question: how does this application make money? Let’s find out.

If you want to know more about PayPal read: Who owns Paypal?

The secret of making money

One of the most frequently asked questions is whether Venmo is free or paid. Well, the answer to this question will be it is partially free. But that doesn’t mean that it doesn’t have other revenue sources. Since the time of its acquisition, this platform has tapped into more revenue sources. Although it is acquired by PayPal, it doesn’t make revenue in the form of an interest in the Venmo wallet balance. 

Venmo’s revenues are divided into two categories

  • Merchant fees
  • Credit Card fees 

Merchant fees 

Merchants that accept online payment are now accepting payments through Venmo. As it accepts this platform as a payment option. So the merchants naturally pay a fee i.e., 2.9%+fixed charges, same as they would pay PayPal. However, this integration has proven to be a win-win situation for both merchants and users. The users can pay with their preferred medium and the business will get a mention on social media. 

Credit card fees

Usually, Venmo doesn’t charge anything from people if they’re paying using their debit cards or Venmo balance. However, if they’re paying using their credit card then Venmo charges them fees for the transaction. It charges around 3% of the value of that particular transaction

These are the ways in which Venmo is making money. But one of the most asked questions is whether this app is safe. Venmo uses high security (bank-level) and encrypts data to secure the transaction. It ensures that you send or receive money securely. You can also protect it by securing it with a pin or fingerprint.

Bottom line

As you see, Venmo is used by many people across the U.S and it is especially proving to be beneficial to millennials as they can now transfer or receive money without any hassle. If you have understood how Venmo makes money and want to know how other business models work then check out the other articles.
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