Everyone knows about Paypal and its functions. But, did you know that PayPal owns a whole other transaction app called Venmo?
Yes, Venmo is a fun yet very useful app that is getting immense popularity nowadays. The app is fun because a user can use it as a social network where he can comment on the payments made by his friends.
Venmo is very user-friendly when it comes to transferring money. However, currently, only people living in the US can use this app to send or receive money. In this article, the main focus would be on how does the app called Venmo makes money. Before that, let’s get into some details about what Venmo actually is.
Venmo—all the basics explained
In the year 2009, two Pennsylvania University students Iqram Magdon-Ismail and Andrew Kortina, developed the Venmo app. The app was launched in 2012 and was supported on both iOS and Android, but only people living in the US could use it.
Venmo works as a money transfer app where you can receive or send money to others. Like any other money-transferring app, you have to install it on your device and link your bank details or credit card to the app. Keep in mind that you will be charged for each transaction whether you are sending or receiving any amount. FYI, Venmo charges 3 percent from every transaction.
Venmo can be used to do the following things:
1. Exchange of money between two people.
2. Send charges to someone.
3. You can use it to store funds on the Venmo platform.
4. Cash-out through the linked banking system 5. API- this feature allows you to connect your Venmo account to different websites and businesses.
Venmo’s API feature can be used for many things
1. Making payment and shares
-Venmo’s API structure can be used to do transactions with networks/groups/individuals. -Venmo users can link their bank accounts/debit cards/credit cards very quickly.
2. Interaction with different people
-Here, you can interact with different groups or individuals using the Venmo app. You can share your business experience, prices of other products, and many more.
3. Making Purchases in minutes
-With the Venmo app, you can make any purchase in minutes from your mobile!
4. Easy bank money transfers
-You can make money transfers to other’s bank account pretty quickly and safely.
Which process does Venmo follow to make money?
There is mainly two money-making processes of Venmo; they are:
1. 3 Percent Service Fee
In case you are using the Venmo App or your credit card, Venmo will charge you a service fee of 3%. Though, Venmo does not charge any interest on the fund. It is just Venmo’s way of making money.
2. 2.9 Percent Service Fee
Venmo uses another principal for their income, which is the 2.9 Percent Service Fee principal. Whenever you use any of Venmo’s services, they charge you a 2.9 percent service fee. PayPal invests the balance of its users in making money, but Venmo doesn’t do that. So, they have to use these two principals for their income.
Recently, Venmo decided to make a partnership with popular apps. One such app is Uber; users now can pay Uber Eats and Uber with Venmo.
1. 3 Percent Service Fee
In case you are using the Venmo App or your credit card, Venmo will charge you a service fee of 3%. Though, Venmo does not charge any interest on the fund. It is just Venmo’s way of making money.
2. 2.9 Percent Service Fee
Venmo uses another principal for their income, which is the 2.9 Percent Service Fee principal. Whenever you use any of Venmo’s services, they charge you a 2.9 percent service fee. PayPal invests the balance of its users in making money, but Venmo doesn’t do that. So, they have to use these two principles for their income.
Recently, Venmo decided to make a partnership with popular apps. One such app is Uber; users now can pay Uber Eats and Uber with Venmo.
How is Venmo Monetized?
Well, the truth is that the makers of the app faced quite a challenge to monetize Venmo. The relentless desire to make the transactions easy for the users has not helped Venmo to get its desired revenue. Still, it managed to make $200 million at the end of 2018 (as per the latest reports).
On the other hand, the other competitors, like Square, is way ahead of monetizing the cash app. Venmo makers can’t deny the fact that many functions of Venmo are the replica of Square.
Still, the CEO and other innovators of Paypal are quite sure that Venmo can make it right in the global market. As of now, mainly, the 3 percent charge, which is charged in each credit card transaction, is mostly the primary way of monetizing Venmo.
Per-transaction Fees
This is the step where Venmo connects with PayPal. Whenever a business uses Venmo for online transactions, it gets charged with per-transaction fees. Through the per-transaction fees, Venmo earns a considerable amount of money.
There is also another type of feature that helps Venmo to earn. The ‘smart pay button’ is a feature that can be added to other apps for easy in-app purchases through Venmo.
One such app which added the smart pay button is Uber. Users can now pay their bills with Venmo in the Uber app itself with the “smart-pay” button’s help. This is really convenient for busy users.
Venmo Debit Card
Recently, Venmo introduced its physical debit card. If a place is accepting MasterCard, then it will accept Venmo cards too. Venmo’s parent company PayPal launched this card in the year 2018.
The Venmo debit card can be used for online transactions or for withdrawing money from ATMs. While shopping, you can earn cashback too from some selected stores.
In order to apply for the Venmo card, you have to follow some simple steps. Go to the settings, tap the ‘Venmo Card’ option, and then tap on the ‘get Venmo card’ option.
After following these steps, you can select between six different colors for your card. You have to provide some more information like your date of birth, your legal name, and your last four digits of Social Security Number.
Using the Venmo card is simple. One can use it like any other debit card. You can use the Venmo card in any ATM where MasterCard is accepted. One can pay their Venmo balance to pay for transactions or transfer money to others’ bank accounts. However, some fees are applicable in case you are doing your transaction with the Venmo card. The amount of the payments depends upon your transaction.
How much does Venmo make a Year?
As per the latest analysis on Venmo (2019), the PayPal CEO claims that Venmo can cross its last year’s revenue and can make $100 million extra. The approx revenue figure is considered $300 million.
On the other hand, the recent pandemic caused by coronavirus is responsible for more digital transactions. So, one can say that the cash app can make a fair amount of profit in 2020.
The Social Side of Venmo—all those extra fun
There are some social sides of Venmo, which makes the app fun to use. There are many fun emojis that you can use with your transaction. This helps to keep the transaction transparent between two users.
Fun Emojis
Transferring money with Venmo is fun. You can add emojis to your transaction, which can describe your mood. This makes transactions very fun.
Social Dynamics
Venmo has a rich social side. Though you can’t post pictures and watch videos like Facebook and Instagram still, it can be used to acquire some stats of someone’s social stats. Venmo also has a social feed, which makes it different from other online payment apps.
Is it Safe to Use Venmo in 2020?
As you know, Venmo is an online transaction app, so there is always a risk of hacking. But generally, it is considered pretty safe as it uses bank-level encryption to protect your financial data. You can also add many security levels to make it more secure. It is also recommended to use the app for a transaction with people you know very well. This makes the chances of any fraud significantly less.
Since Venmo is a social-online payment app, you have to be careful from scammers. Don’t share your private information with unknown people. Otherwise, the app is secure, keep these things in mind, and you are good to go.
Are There Problems in Venmo?
Though Venmo is usually considered safe, there are some minor problems with Venmo. Some have said that Venmo reacts slowly to their security issues. For example, PayPal had to pay a fine of 175,000 dollars to the state of Texas for its security issues.
Venmo was also reported guilty for violating some guidelines. One such example of the act is the Gramm-Leach-Bliley Act. All the financial companies need to follow some guidelines provided by the Government. Failure can cost fines, which can reach a huge amount.
How to Protect Yourself While Using Venmo?
Following some tips can protect yourself while using Venmo-
1. Only exchange money with people whom you know very well.
2. Don’t leave a large amount of money into your Venmo account. Only keep a small amount which you need for everyday needs.
3. It is recommended to hide your transaction history into ‘Private’ in the settings.
4. Don’t share your Venmo data to others who claim for exciting cash backs. Most of the time, these are scammers who try to waste your hard-earned money.
Conclusion
Most of the money that Venmo makes comes from the transaction fees that they charge for your transactions. The people responsible for developing and promoting Venmo are putting much effort into improving its functionality. THE PayPal CEO is pretty confident about Venmo and believes that the new and improved Venmo can make its desired profit in the near future.