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Venmo: Social Fintech scares American banks

18
sep
2019
Bertrand Leseigneur
Retail Innovation Correspondent USA
4 minutes
Since its launch in 2009, Venmo application allows users to transfer money to other users of the service. More and more used in the United States, this mobile payment service belonging to PayPal  has nearly 40 million users.

The concept

At the moment, Venmo is only available for users living in the United States. In the first quarter of 2018, the service processed $ 12 billion in transactions and in 2017, nearly $ 37 billion was traded on Venmo.

Launched in 2009, Venmo offers an interface allowing a quick and easy payment in just a few clicks. The application already has more than 40 million users and 2 million stores use the system.

5 good reasons to download the Venmo app

Accessible à tous

Venmo is very easy to use.

To get started, you need to download the mobile app on iOS or Android.

You then open Venmo application and choose your registration method (via Facebook or via e-mail).

Then, just check your phone number and your email address, then add and check your bank account.

The recipients of the transactions can be found via a phone number, a Venmo username or via their e-mail.

Users can link their bank accounts, debit cards or credit cards to their Venmo account. Payment with a bank account or debit card is free, but credit card payments carry a 3% fee for each transaction. Fees that will be paid by the user of Venmo.

If a user does not have sufficient funds in his account during a transaction, Venmo will automatically withdraw the necessary funds from the bank account or registered card.

 

Pay your favorite restaurant via the app

Whether it’s a refund between friends, the payment of a purchase in a shop or a restaurant, Venmo offers a very simple and intuitive tool.

For example, a New York restaurant offers the option of paying via the Venmo app. So just look for the restaurant account on the app to proceed with the payment.

Once found, you can add it to your Venmo contact list for a next payment or just make a one-time payment.

Then, simply proceed to the payment indicating the amount to be debited.

Validate your payment in one click

To validate a payment, always describe the payment using words or emojis.

All you have to do is click on “Pay” to proceed with the payment.

The principle is the same when you want to “bill” someone for a refund. We look for the contact in his list, we indicate the amount to pay and then click on “Request” to send a request for payment to his or her friends.

Socialize your purchases

When a user makes a transaction, the details of his transaction (without its amount) are shared on the user’s “newsfeed” and his network of friends.

Venmo includes three social streams: a public stream, a friend stream, and a private stream. By default, all Venmo transactions are shared publicly. We can see all the transactions made by his friends (if they also left their public stream!).

Privacy settings can be changed so that all posts are shared only with a user’s Venmo contacts, or kept private.

Each transaction must include a description in the form of text or emoji to validate the request. This is one of Venmo’s prerequisites. We can write the name of a restaurant or simply put some emojis to describe the reasons for payment. It is up to the user to choose how to describe their expenditure.

This description is necessary to complete the transaction. Overall, 30% of Venmo transactions include at least one emoji. There have also been comprehensive studies done on the use of emoji in Venmo. We pay as we communicate with his friends by departing from the solemn nature of traditional banking applications.

Pay with a physical card

Users can also order a Venmo MasterCard and pay via it. The card operates on the MasterCard network and provides access to ATMs and overdraft protection. It allows daily withdrawals of up to USD 400 (these withdrawals are charged USD 2.50 in distributors who are not Venmo partners).

These features make the card similar in many ways to a traditional debit card, making it attractive to Venmo users. In addition, the card can be personalized when it is acquired.

Venom : The future of Fintech?

The millennials’ favorite money transfer application would have reached Google or Uber’s level of notoriety in all conversations! During a dinner at the restaurant, we no longer say: “Pay me back”, but rather “Venmo me”.

The banks are concerned about Venmo’s convenience and have reacted by launching Zelle. 

Zelle is a peer-to-peer payment solution created by Early Warning Services, a company owned by Bank of America, BB & T, Capital One, JPMorgan Chase, PNC Bank, US Bank and Wells Fargo. This company looks like to Venmo but does not have a social aspect.

 

However, transfers are recorded in users’ bank accounts in a few minutes thanks to their native links with banks. With Venmo, this currently takes several days.

Although in terms of volume, Zelle is ahead of Venmo, we can see that in terms of adoption, young people still support Venmo for the moment.

Due to Venmo’s popularity and social component, it is difficult to imagine Zelle shading the peer-to-peer payment start-up among young people.

The unique social structure of this payment application makes Venmo an unprecedented cultural phenomenon in the fintech sector. However, due to the power of Zelle, PayPal (owner of Venmo) will have to find to create new revenue channels, as the business model remains fragile.

Bertrand Leseigneur
Retail Innovation Correspondent USA
Based in New York, Bertrand is the Innovation Retail correspondent of the Echangeur in the USA, he decodes the latest American concept stores !!
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