Hi all, Julie here. Venmo is today the dominant app for settling millennial brunch tabs, processing $21 billion in transactions in the first quarter of this year, a 73% increase from 2018. But it's easy to forget that less than a decade ago, it was just another tiny, money-losing startup, with only 3,000 users three years after being founded.
In 2012, when Venmo was first acquired by Braintree (a company later scooped up by PayPal), it was a different era: Almost everyone carried cash, online transactions on platforms like Venmo were riddled with fraud, and mobile apps were a relatively new product.
Now? Companies large and small are scrambling to offer mobile payments. A few entrants include Facebook Inc., with its fresh payment ambitions, Alphabet Inc.'s Google Pay, and Square Inc.'s Venmo competitor, Cash App.
But even though the tech industry has made real progress toward delivering us a world without paper money, many of the same problems with these payments services' profitability persist. Most companies that offer cash transfers take no transaction fee – a surefire way to incinerate investor dollars.
That's led more companies to add other services that do make money. Those new offerings include debit cards, retailer partnerships, and fees for instantly transferring funds into a user's bank account. Today, analysts say, revenue for cash-transfer companies has started to climb. Even Venmo, whose existence once looked so precarious, is now reportedly closing in on profitability.
Plenty of questions still remain about Venmo's business, though. An important one is seemingly simple: How many people use the app per month? In April, its parent company PayPal said that more than 40 million people had used Venmo in the last year, but the company has so far declined to release a monthly breakdown.
That makes it difficult to judge how Venmo is faring compared to its ascendant competitors like Cash App, which reported in December that it had 15 million monthly active users (a more traditional metric). "No one else we look at does annual numbers,'' said Barclays analyst Ramsey El-Assal, who called Venmo's divergence from the norm "bizarre." What is clear, at least, is that Venmo has come a long way from its days as a tiny startup. Whether it can turn a profit is another question. —Julie VerHage
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