Since perhaps its inception, the payment platform Venmo has not been well-received by Wall Street. Essentially, investors feel like PayPal’s peer-to-peer payment system is not profitable but the innovator of online payments is holding strong. As a matter of fact, PayPal has strongly indicated that it has absolutely no plans to sell or spin off this asset in the near future. And yes, PayPal does, in fact, consider Venmo an asset.
Accordingly, PayPal chief financial officer John Rainey responded to such concerns explaining that Venmo’s integration with PayPal is part of what makes it so attractive to users, particularly the millennial audience.
Now, it is important to remember that PayPal first acquired Venmo in 2013. It was actually part of the $800 million purchase of the digital payments system known as Braintree. And since that time, Venmo has consistently grown its very loyal subscriber base, mostly among teens and millennials. This growth led PayPal to expand Venmo’s service into its own debit card service several months ago. All in all, then, Venmo has now become integrated with many other mobile-based businesses including the likes of Uber, Uber Eats, and GrubHub (all also very popular among millennials).
To be fair, Venmo has struggled to add value to PayPal’s bottom line in the past. A promising third quarter, however, could be just the change PayPal has been looking for. Venmo’s total payments grew 78 percent, to reach $17 billion (in Q3), which is quite a feat, but still only a small fraction of the $143 billion in volume the service did as a whole.
All in all, though, PayPal CEO Dan Schulman remains confident. He points at tangible growth among in that this is, after all, a social app, and that helps it to make money. In fact, he comments, “Our monetization efforts to appear to be reaching a tipping point.”
Indeed, 24 percent of Venmo users have been found participating in what Schulman calls a “monetizable action.” This means roughly one-quarter of Venmo users are doing things with the app that generate profit for PayPal; and more importantly, that is up from 17 percent in Q2 and up from 13 percent in May. In fact, Schulman reminds that PayPal processed more than $1 billion worth of instant transfer volume through Venmo in September, alone.