Online payment gateways and fintech apps are soaring as users are increasingly adopting them as superior alternatives to traditional banking. One of the market leaders, Venmo, has been driving the online payments revolution and pushing forward the adoption of fintech globally.
Picture this: you go out to grab a cup of coffee with your BFF. You get to the coffee place and suddenly realize you left your wallet at home. You don’t have any cash or cards to pay for your order, and your home is too many blocks away to make the quick run to retrieve your wallet. What now? Luckily, your beloved friend will gladly pay for you, and you can just pay her back when you get the chance, no sweat. However, you’re not the type to just let friends pay for you. What can you do? Many of us have been in similar situations before, and even though these are not life or death scenarios, they can be a hassle, especially when you need to pay for more than just coffee. Thankfully, mobile technology has evolved to the point where fintech companies and online payment gateways and apps have multiplied like rabbits in these past few years. We now can use our phones to pay for everything, from a cup of coffee to loans and insurance. So, thanks to fintech behemoths such as Venmo, you can now instantly reimburse your BFF for that cup of coffee and muffin you so wholeheartedly devoured without delays or the need for cash withdrawals, complicated transactions, or credit cards.
For generations, banks were the sorcerer’s stone of the financial world. Our parents, grandparents, and even ourselves had a set-in-stone relationship with our preferred bank’s branch. Now, we’ve taken the leap to digital and have left behind in-person banking interactions for online, real-time financial solutions. That’s what the digital finance revolution is all about—using mobile technologies, which now have a staggering 6.7 billion units used worldwide–almost 84% of the world’s population–to make our everyday lives and finances much more manageable. Customer expectations regarding payments have changed, and both service providers and clients demand hassle-free instant financial experiences. And honestly, we’re not going back.
With that in mind, we at Foonkie wanted to highlight how Venmo has impacted the digital finances environment and how the online payments platform has driven the fintech revolution of the last few years.
What is Venmo?
Owned by PayPal, Venmo is an app that enables cash-free P2P payments. Users can quickly send and receive money from friends or acquaintances and buy goods and services online or in person using Venmo’s debit or credit cards. Founded in 2009 by Andrew Kortina and Iqram Magdon-Ismail, Venmo started out as a simple social media-like app that allowed users to pay and request money from friends. Shortly after, the app integrated a social network where friends interacted and exchanged payments, making the app extremely popular. Venmo gained traction very quickly, and by 2012, it attracted the attention of PayPal, who purchased it shortly after. The online payment app swiftly grew into the robust financial platform it is today from that point on. It boasts a whopping 80 million users with a forecasted 120 million users for 2023! The fintech app also amassed a staggering $58 billion total in payment volume by the end of 2021, a 52% increase compared to the prior year’s total revenue.
One of the main reasons Venmo became so popular so fast is its simplicity. In its 13 years, the app kept its initial uncomplicated interface–send or request money using your Venmo balance or any of your integrated accounts or cards, easy peasy. However, with time, the people at Venmo started adding features such as ACH payments, purchases via QR codes, bank account and card integration, Venmo cash, and the addition of Venmo credit and debit cards (more on these later). Moreover, they recently included more complex features that allow users to buy and sell cryptocurrencies, cash checks, and use their Venmo accounts to check out at Amazon and many other authorized websites that also use PayPal.
But the best part of it all, and the reason why Venmo disrupted the online finances ecosystem, is that despite all the new features and increased functionality, Venmo keeps getting easier to use and is now more user-friendly than ever. It keeps its learnability curve down and holds its simplicity by allowing users to access fund sharing and money management without any hassle. In addition, the app is still very social, fun to use, and makes finances, a usually complicated subject, interactive and straightforward for all users.
Due to its evident growth within the fintech market, Venmo is now one of the leaders in the P2P payments arena, along with high-value players such as Zelle and Square Cash. As a matter of fact, Venmo, which can now be considered an e-wallet, and other similar fintech companies are becoming the norm, and traditional brick-and-mortar banks are taking a big hit. Thanks to apps like Venmo, users are moving to digital, and banks are starting to notice.
Jason Kupferberg, Bank of America research analyst, said: “Venmo has significantly evolved from once being a predominantly P2P platform to where it is today as a digital wallet with multiple monetization levers, as the platform continues to morph into a ‘super app,'”
There’s no way around it: Venmo’s expansion squeezes traditional banking and lessens its importance within the financial ecosystem. And while some users and businesses may still opt to conduct their transactions using their good ole’ bank branch, the truth is that fintech apps such as Venmo are disrupting the long-standing traditional banking market.
How does Venmo work?
Venmo is free to download and available on all US application platforms. Its primary purpose is very straightforward and simple: to allow users to receive and send money instantly. When a user receives a payment, it is added to their Venmo balance, where they can keep it or transfer it to their linked bank account. But that’s hardly a groundbreaking premise, right? In fact, some of you may ask: OK, but what’s new here? Well, aside from its simplicity and ease of use, one of the most innovative aspects of Venmo is that it includes social and interactive elements to transactions. When users download the Venmo app, and after entering their personal and banking information, users can add friends, just as they would on social media. The app displays a feed where users can see all payments, and on each transaction, they can add notes, emojis, and even animated stickers. However, if a user wants to hide their transactions for some reason, they can make them private and shareable only between select friends.
Additionally, Venmo allows users to split bills, restaurant checks, rent, or other expenses with one or multiple friends. In that sense, we could say that Venmo is arguably the most versatile, user-friendly, and functional fintech app out there. Users simply download the app, choose their registration method (Facebook or email), enter their phone number and other personal information, and finally link their preferred bank account and credit or debit cards. Users can easily send or request money via the Pay or Request buttons on the home screen from that point on. In addition, users can find the recipients of all transactions via their phone number, Venmo username, or email address. Moreover, the app allows users to enter as many people as they want and can add notes and emojis to their transactions, making the user experience very enjoyable.
As far as fees go, Venmo doesn’t charge for downloading the app, doesn’t have any annual or monthly fees, and doesn’t charge for payments done via bank account or debit card. They also don’t charge the recipient for receiving funds or making standard transactions. However, there are some fees depending on other payment methods:
- Credit card payments have a 3% fee per transaction.
- Check-cashing has a 1% fee for payroll and government checks.
- Check-cashing has a 5% fee for non-payroll and non-government checks.
- Instant transfers have a 1.5% fee.
- Finally, Crypto buying and selling have a 2.3% fee.
Venmo also has its own debit and credit cards that users can easily acquire. The Venmo debit cards allow users to bring their Venmo balance with them and use it to pay for goods and services and earn cashback that goes straight to the Venmo balance. On the other hand, the Venmo credit card, powered by Mastercard, also allows users to pay for goods and services. In addition, it has additional perks such as a personalized QR code for payments, easier crypto purchasing, touch-free shopping, and increased security features.
How Venmo plays a vital part in the fintech revolution
Digital payment methods became increasingly relevant these past two years thanks to the COVID pandemic, where a newfound fear of physical money as a virus carrier became widespread. Actually, more than 86% of consumers stated that their payment habits changed in response to the pandemic, becoming more digital, with over 62% of them adopting either PayPal, Venmo, Zelle, or a combination of them in 2020. This behavioral change gave Venmo a valuable edge. As a result, the company started riding the mobile payments wave, becoming a key player in the fintech market and reaching a payment volume growth of 60% by the end of 2021. Additionally, unlike one of its most fierce competitors Zelle which is bank-owned and leans towards an “older” audience, Venmo skews toward millennials and has a younger user base which will likely grow steadily in the upcoming years and will surely reach 100 million users very soon.
Needless to say, Venmo has a lot going for it. It has played a significant role in the fintech revolution and has undoubtedly carried its weight in driving the adoption of mobile payment solutions in the US. Here are some of the main ways Venmo has played a vital part in the fintech revolution.
1. Venmo promotes faster, more straightforward transactions
One of the main perks of online payments is their ease of use and straightforwardness, and herein lies a large part of Venmo’s popularity. Imagine turning to online banking and being presented with complicated interfaces and lengthy processes to fulfill transactions. You would simply quit and return to conducting your business at your bank’s physical branch. Hence, your complex fintech app would be pointless—bye-bye fintech revolution. Well, Venmo makes sure that doesn’t happen.
Venmo’s app hardly has a learning curve: you download it, register, and start using it; in other words, you’ll be receiving and sending money in no time. The app has an intuitive interface and allows users of all ages and tech knowledge levels to easily link their bank account or card and start using them to pay for stuff. However, the best and most user-friendly aspect of Venmo is that it socializes finances and adapts them to the way we usually communicate via social media. As a result, paying or purchasing something using Venmo is as simple as texting, emojis included, which we do on a daily basis.
Lastly, Venmo also simplifies splitting bills and everyday expenses such as rent or utilities between roommates. For that, the app offers an on-screen calculator when you send or request money that helps to simplify transactions further and, along with the points exposed above, takes tediousness and complexity away from finance-related matters.
2. Venmo socializes finances
As we touched on earlier, one of Venmo’s biggest hooks is that it leverages social media elements to increase its engagement and propel its user experience forward. Venmo has successfully managed to include social media features and components such as likes, emojis, comments, and messages that users can attach to each payment. They can also use these elements as they wish to make their experience more fun and relatable, something that traditional finances aren’t known for. Its broad user base seems to appreciate this aspect of the app, and by making the app more fun to use, Venmo makes sure to keep growing by encouraging users to ask their friends to download the app and share payments in a fun, casual way. Actually, within many social circles, not having Venmo can be inconvenient. As a result, we can safely conclude that Venmo is quickly becoming a must among groups of friends who are increasingly leaving cash behind and replacing it with the ubiquity that Venmo offers. And in fact, the app is now so popular among millennials that it has become a verb, replacing the word transfer with Venmo. Or, as many Venmo users say: “I’ll Venmo you the money.”
3. Venmo can be easily used by small businesses and can be integrated with all types of apps and platforms
One of Venmo’s most fantastic perks, and one of the main ways it is helping disrupt online payments, is the fact that it can be easily integrated with any app, website, or online platform to drive e-commerce transactions. As such, Venmo is an invaluable tool for online retailers and enterprises to drive sales and increase consumer engagement by providing them with a more straightforward, faster way of paying for stuff. Unlike other traditional payment options, Venmo provides a more straightforward, familiar, and easy-to-use payment method that users of all ages, especially younger ones, may already know and be comfortable with. It’s no secret that having to enter your credit or debit card information when paying for something is a hassle, and sometimes, it can even be risky. In that sense, Venmo provides a safe, fast alternative to conducting purchases. Actually, a study conducted by Statista showed that one of the main reasons people abandon purchases is because they have to enter their payment information during checkout. Venmo takes care of that because it already has all the necessary information to conduct the transaction, thus potentially helping businesses reduce purchase abandonment rates.
Venmo is also ideal for small businesses and startups because it doesn’t require expensive and complicated integration processes or development procedures. Instead, sellers can simply accept Venmo directly using the app by creating a business profile and receiving payments through the app or in-person at the store with a unique QR code for touch-free checkouts. For that, Venmo has no monthly fees, no set-up fee, and an affordable seller transaction cost of 1.9%. Plus, they give sellers the option of receiving tips, helping small businesses earn more money. However, for larger businesses or companies that integrate Venmo with their websites and apps, the company charges a 3.49% fee per transaction.
Lastly, Venmo offers an unparalleled and almost free marketing alternative. How? As we mentioned earlier, Venmo is a type of “social-media-ish” fintech app. So, when a customer completes a purchase using Venmo, that sale becomes visible to all of that user’s friends. As a result, they all see the vendor’s information, and some of them may even check it out. In other words, Venmo’s feed is basically free marketing for companies who use it to fulfill transactions and represents a form of digital word of mouth, which is priceless.
4. Venmo allows users to buy and sell cryptocurrencies
Another way Venmo is one of the top drivers of the fintech revolution is how the app introduces the option of buying and selling cryptocurrencies. As we all know, crypto is becoming increasingly popular in the online financial world, and younger users are starting to delve into crypto to pay for stuff. However, crypto-related transactions don’t come easy for everyone, which is why Venmo is such an excellent platform for users to get their feet wet in all crypto-related matters. For one, the app has some educational resources to help users get acquainted with the subject. They also offer four different types of crypto options (Bitcoin, Ethereum, Litecoin, and Bitcoin cash) to give users more options for investing. And, if that weren’t enough, users can invest as little as $1 in case they aren’t comfortable with investing more significant amounts. Users can also set price alerts to track their investments and share them via Venmo’s feed with their circle of friends.
Yes, not everything can be good. Just as with any other disruptor, Venmo has some drawbacks you need to be aware of before deciding whether or not the app can be considered a top driver in the fintech revolution. Here are the main ones:
- Privacy: Venmo’s default privacy settings mean that all payments are publicly displayed on the user’s feed. Granted, these descriptions don’t include the amount, but they do display usernames for both payer and payee and the message contained in the transaction. Yes, users can change these default settings to private. However, it seems counterintuitive to make this information public by default. If a user doesn’t know how to change these settings or doesn’t realize they’re being shared publicly, it can be frustrating and draw from the app’s user experience.
- No international options: Venmo works only in the US, which leaves international payments out. If users want to send money to friends or family outside the US, they need another app.
- Payment cancellation: Venmo doesn’t support payment cancellations, meaning that once a user sends money, even if it’s by mistake, they can’t get it back. If they need a payment to be returned, the app suggests asking the recipient to return the money. Users can open a return claim, but Venmo can’t refund the sender unless the recipient agrees.
So, is Venmo revolutionizing fintech?
There’s no denying that Venmo is quickly becoming a game-changer within the online banking and fintech ecosystems. Fintech apps were born out of a need for faster and more straightforward, and accessible online financial alternatives. As a result, their coverage has been increasing at neck-breaking speeds to the point where now, almost two-thirds of all financial transactions are made online. Apps such as Venmo add to this coverage and help the fintech ecosystem grow and become even more accessible. Not only is Venmo one of the most user-friendly and straightforward fintech apps out there, but it is also one of the most versatile and feature-rich, allowing its users to access a myriad of services to fulfill their financial and social needs successfully. From paying their BFF for coffee to dealing with crypto and budgeting, Venmo represents an all-in-one solution for our most pressing and basic financial necessities. As a result, we can genuinely say that Venmo is the fintech app of the future.
Nonetheless, is Venmo successfully carrying the weight of being the sole and ultimate fintech disruptor? Not quite. With all of its benefits and staggering adoption indexes, the truth is that while Venmo plays a critical part in the modern fintech revolution, it isn’t the top disruptor. For one, Venmo only works in the US, leaving out millions, even billions, of potential users outside its scope. As we mentioned earlier, one of the main perks of fintech companies is their potential to increase the coverage and reach of online financial services. If a fintech app limits its scope to one territory, it is drawing back from one of the primary purposes of its existence.
On the other hand, Venmo’s social aspect is one of its most crucial aspects and could potentially revolutionize the way we see online finances. It increases brand visibility, which helps companies of all sizes edge forward in their markets, and, maybe in the future, Venmo could monetize this visibility. Additionally, Venmo is the only fintech app out there that uses social media-like features to increase its usability and propel its adoption. It has done so successfully to the point where its users now use the brand’s name as a verb, a perk that no other fintech app has. However, even with all its benefits and uniqueness, Venmo is still a long way from being the true pole bearer of the fintech revolution. However, it is battling vigorously for a gigantic share of the online banking market, increasing the pressure for other fintech companies to yield innovations and keep up with the modern way of banking.