My moment of self-awareness came while holding auditions for my campus improv comedy group. As an ice breaker, we went around the room and offered people the chance to introduce themselves, where they were living, and the their most clever Venmo payment to date.
A hush fell over the crowd. Nervous freshmen glances ensued.
It was early September and not one of the BC freshmen in the circle even knew what Venmo was. Looks of horror appeared on faces of our upperclassmen who could not believe the freshmen’s ignorance, and more looks of horror appeared on the faces of the freshmen who were already thoroughly terrified by the audition process. This was when I realized that, despite using Venmo with everyone I knew at BC, the rest of the world hadn’t really caught on to the idea.
Back in 2014, when PayPal acquired Venmo, recent survey data at that time indicated that many people had no use for an app like Venmo. The top reasons people were not interested were because they either did not trust sending money through an app or didn’t see a reason to switch from cash. But unsurprisingly, Venmo did hit its stride with one particular demographic–millennials, the generation obsessed with captioning everything else, so why not payments? By 2016, Venmo was one of the top iPhone apps with the highest portion of millennial users, right behind Yik Yak, but edging out competitors like GroupMe, Tinder, and Vine.
In an interview with the CEO of PayPal, executive Daniel Schulman explained that, “the secret sauce of Venmo was turning a transaction into an experience.” In contrast to other options, like PayPal’s own pre-existing mobile payment options, Venmo offers its users a social network to share their payments with the world. Users are not required to publicize their payments, but as the CEO points out, most users do opt into the social aspect of the app. Millennials have witnessed the rise (and fall) of many different social networks over the years which I believe is very indicative to why a payment app might be most accessible to millennials whose daily smartphone interactions are already centered around being social. On Venmo’s website the main call-to-action occupying the homepage is to “Sign Up with Facebook,” suggesting that mobile payments are one very small step away from a potential user’s current habits.
But the average person is probably not aware of the fact that PayPal owns Venmo, and it’s entirely possible that PayPal would like to keep things that way. In a talk the CEO gave to undergraduates at NYU, one student even apologized to Schulman, confessing that most of the student was using Venmo instead of PayPal, unseeingly unaware of Venmo’s place in PayPal’s product portfolio. But he explained that this was not something PayPal was too concerned about. Does an end user really care if Instagram is owned by Facebook, or is the right brand name trusted by the right segment the only part that matters?
Outside of the millennial segment, usage of Venmo as the preferred mobile wallet solution is actually quite low–probably lower than the average millennial might think. Numbers from the 3rd quarter of 2016 suggest that PayPal’s main mobile app offering remains the most popular mobile wallet at a 49.5% share of survey respondents compared to Venmo whose 7th place total is only about 6.3%, according to Catalyst Consulting Group. Ahead of Venmo are Google Wallet, Apple Pay, Android Pay, and even mobile wallets offered by individual banks. Surveys like this that place PayPal in first place even without Venmo’s user base accounted for only reemphasizes PayPal’s CEO’s findings that a multi-brand approach does not seem to be resulting in cannibalization or harmful marketplace confusion. In fact, the phenomenon of Venmo becoming a verb in the circles of people that use the app regularly just goes to show how the experience of using Venmo is unique enough, with its social offering, to be a brand that’s more than just the sum of its transactions.
But competition could be heating up in the mobile wallet/payment space. The recent popularity of mobile payment options at points of sale through Apple Pay and Android Pay could threaten person-to-person operations like Venmo if a company like Apple chose to embrace the experience aspect of owing friends money. Additionally, recognizing Venmo’s social features as a critical jumping-off point in the market, Facebook has also added payments in Messenger to allow friends to easily exchange funds. But with its privacy policies a large part of its history, underlying trust issues about users’ banking information security may play a role in the market’s trust of who is handling their payments.
Google, in addition to Android Pay and Google Wallet, is rolling out functionality in Gmail’s Android app that would now allow mobile users to attach money to an email the same way they would attach a Word document. This move is a bit confusing considering users’ ability to do this through Google Wallet already, but with more than one billion monthly active Gmail users, maybe a more centralized and up-front offering is Google’s optimal route for person-to-person payments. I believe what Google has learned is that an all-in-one solution for sending friends money and spending money at the store might not be the right solution for today’s market.
Big banks, whose individual offerings are numerous, but much less utilized by millennials,
have chosen to team up in a collective approach in the form of a new app called Zelle. Coming in 2017, 19 different banks, including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, are teaming up for a new website and app that will let users send and request money much like Venmo. The sleek, Apple-esque website boasts its main selling features: bank-level security and instant transfers. These features are important because the speed of transactions and the level of security offered are both very contingent on the banks themselves, even in Venmo’s case. Users who trust their bank enough to hold their money might also be expected to trust an app offered directly by their bank. And with Venmo requiring more than a day to cash out into a user’s bank account, instant transfers among participating Zelle banks might be a very appealing feature to those banks’ current customers. With the influence of these top banks and their large customer base, pushing a service like Zelle out to the public might be a winning strategy that can push non-millennials over the edge and into the mobile P2P payment space.
Venmo has certainly achieved the honor of being the first person-to-person transaction service that really does offer a unique experience. Suddenly, a simple $3 debt paid to a friend can involve an entire micro-culture of emojis and sarcastic payment descriptions. New users who visit the Venmo website are immediately presented with a live feed of globally-visible payments whizzing by from person to person, which I believe perfectly crystallizes the connectivity Venmo is its offering users. Without even being a bank, Venmo was able to build trust with its users simply by allowing them to personalize a payment with an inside joke that turns a previously routine transaction into a social interaction.