Venmo made its debut in 2009 and seemed like the perfect competition to Paypal, since individual users could send and receive electronic payments for free. Venmo encourages use through a social display, and allows individuals to bill their friends and allow individuals to pay friends with their debit or credit card. With Venmo, a last minute trip to the ATM is eliminated, and money can be transferred quickly between users, as well as to individual bank accounts.
Funny enough, Paypal now owns Venmo. Venmo was bought by Braintree for $26.2 million five months after they launched. In 2013, Braintree then cashed out itself to Paypal for $800 million. Even though Paypal charges a 2.9% fee for all debit and credit card transactions, Venmo still remains a free-to-use platform. If Venmo users aren’t paying, how does Venmo make money?
Venmo Is Not Like the Others
Other free-to-use money platforms earn their money through the use of advertisement. This can make apps messy and inconvenient to use. Venmo stays away from the use of advertisement to keep their interface easy to navigate.
Venmo Makes Money Via Businesses
At the user-level, Venmo does not offer payment services to businesses. However, they do offer Venmo AP and Venmo Touch services that allows businesses to receive Venmo payments. They charge businesses a fee of 2.9% for these transactions. While this is a small cost to businesses, it can come with benefits, since customers are given another free option for mobile payments. This fee is also less than what many credit card companies charge businesses.
Venmo Makes Money Via Credit Card Transactions
When users pay with their linked bank accounts or debit cards, they are not charged a fee. However, all credit card transactions that take place will endure a 3% fee.
Venmo users can expect the free transactions to continue, since Venmo targets smaller businesses, such as food trucks and cafes, to earn money. Use the Venmo app, and you can essentially leave your wallet at home.