Venmo is a digital e-wallet or mobile payment service, and it is a subsidiary of PayPal. Like other digital e-wallets, Venmo allows users to quickly transfer money to other people’s bank accounts with the use of their phones. In fact, using Venmo as a payment option is so popular that it is now used as a verb, and it is not uncommon to hear people say things like, “Don’t worry, I’ll just Venmo you.” The transactions made using Venmo are relatively fast as payments are made instantly and without problems.
The application also has a social feed with which you can share comments on every transaction that you make. This feature is beneficial to the businesses that include Venmo as a payment option for their clients as it brings them social advertising. With Venmo, you can perform activities like splitting bills, requesting money from someone else, and paying cash to merchants online and offline. Also, you can send money to someone else, and using its social feed to post and see what you and others are spending money on. Despite the benefits that Venmo offers its users, its use is mostly free. This brings a question to mind, which is, how does Venmo make money?
Initially, when Venmo started, it was losing money. However, immediately it got a good number of accounts with a balance, it was able to start making money by earning interests on those balances. Although Venmo seems like it is offering free services, this is not always the case as some options used for sending money on it require a fee. For instance, transfers made from linked bank accounts, from users’ Venmo account, and through prepaid/debit cards are free of charge.
However, the usage of credit cards attracts fees of 3%. These fees help Venmo make money. That is not all. Venmo also earns money by way of interest on the money that is in all its users’ accounts.
Another way in which the e-wallet makes money is through charging authorized merchants when their clients purchase products and services. Businesses are usually charged 2.9% of the payment made by the clients, and they are also charged 30 cents per transaction for transaction fees, although Venmo does not charge the clients. Despite these charges, though, many businesses still allow clients to pay for their services through Venmo because Venmo’s social feed provides authorized merchants with social advertising. Besides, the majority of people who make use of the application are the younger generation like college students. Since businesses will like to encourage the younger generation to patronize them, they provide these clients with the option of paying for services via Venmo.
A third way in which Venmo makes its money is when withdrawals are made from it. Venmo does this by deducting a transfer fee of 1% whenever instant cash transfers are made from it, with a maximum of $10 and a minimum of 25 cents. Although Venmo is mostly free to users, it has its sources of revenue as enumerated above. While it is not precisely reaping huge profits from its users, it is not swimming in debt either.