Business Operations Business Models

How Does Venmo Make Money (Business and Revenue Model)

The Venmo business model

How Does Venmo Make Money?
Here’s what you should know:
  • What is Venmo, and how does Venmo work?
  • How does Venmo make money?
  • Venmo’s Debit Card
  • Venmo’s Credit Card
  • Venmo Rewards Program
  • Instant Transfer Fees
  • Credit Card Fees
  • Merchant Fees
  • Uber Partnership
  • Venmo’s profit and revenue
  • What is the Venmo business and revenue model?

So you use Venmo and wonder “How does Venmo make money?” Here is a full, in-depth, breakdown of their seven (7) revenue streams and the different products and services they offer, as well as the Venmo business model, their year-over-year revenue, and how Venmo works.

What is Venmo, and how does Venmo work?

Venmo is a peer-to-peer (P2P) mobile phone payment app that makes life easier and more convenient for you to send money, digitally, to family, friends, and businesses.

Founded by Andrew Kortina and Iqram Magdon-Ismail in 2009 and acquired by PayPal through an $800 million acquisition of Braintree in 2013, Venmo has become a pioneer in peer-to-peer (P2P) sending money digitally.

Today, Venmo has more than 52 million user accounts. (Q4 of 2020)

Some of Venmo’s competitors include PayPalCash AppStripe, Zelle, and other mobile payment services.

How does Venmo make money?

Venmo has over 52 million user accounts on its platform. So how do they make money from that?

In Q2 of 2020, PayPal stated that Venmo handled more than $406 million in transactions daily, which over the course of a full year would equal out to more than ~$148 billion in payment volume.

So how does Venmo get a cut of that ~$148 billion in annual transactions? Fees

Statistic: Venmo's total payment volume from 1st quarter 2017 to 2nd quarter 2020 (in billion U.S. dollars) | Statista

Here are the 7 ways how Venmo makes money (in 2021):

#1. Venmo’s Debit Card: Although there are no fees to apply for a Venmo debit card, “there may be fees associated with obtaining cash with your Venmo Debit Card if you are using an ATM or Over the Counter Withdrawal,” says Venmo.

Revenue Stream:

  • $2.50 ATM Domestic Withdrawal Fee
  • $3.00 Over the Counter Withdrawal Fee

#2. Venmo’s Credit Card: Venmo rolled out their credit card released on October 5, 2020. And just like any other credit card, the business model here is interest rates, interest charges, and fees.

Revenue Stream:

  • APR for purchases: 11.99-20.99% + prime rate
  • APR for cash advances: 20.99% + prime rate on top of
  • Cash advance transaction fees: either $10.00 or 5% of the amount of each cash advance, whichever is greater.
  • Late payment penalty fees: up to $40.

#3. Venmo Rewards Program: An extension of the Venmo debit card, this is a program to incentivize users to shop at select merchants that Venmo partners with through a cashback rewards program. And in turn, the participating merchant partnering with Venmo pays Venmo for advertising their business and driving sales their way.

Revenue Stream:

  • ad dollars or % of sales paid from partnering merchants **amount not available**

Aside from their debit and credit card products, Venmo handles over $406 million in daily transactions between peer-to-peer sending to family and friends. And they have 3 fee structures here:

#4. Instant Transfer Fees: If you choose to instantly transfer any of your Venmo balance to your eligible linked debit card or bank account there is a 1% fee (minimum $0.25 fee, maximum $10 fee). You also have the option to transfer your funds standard, 1-3 business days, which is free.

Revenue Stream:

  • 1% fee (minimum $0.25 fee, maximum $10 fee)

#5. Credit Card Fees: There’s a 3% fee for sending money to people on the Venmo platform using your credit card.

Revenue Stream:

  • 3% fee

#6. Merchant Fees: Aside from Venmo being mostly a B2C business model, Venmo is also on the B2B side of things. So whenever you pay a business using Venmo, that business pays Venmo a merchant fee. There are over two million merchants that accept Venmo in the United States.

Revenue Stream:

  • 2.9% + 30 cents per transaction

#7. Uber Partnership: As of July 2020, Venmo announced its partnership with Uber. Which means more reach and revenue for Venmo. This falls under the merchant fee, so every time a Venmo user pays for their Uber trip or Uber Eats order with their Venmo account, Venmo receives 2.9% + 30 cents of every transaction.

Revenue Stream:

  • 2.9% + 30 cents of every Uber and Uber Eats transaction paid with your Venmo card

Venmo’s profit and revenue

Now that you know Venmo’s seven (7) revenue streams – how much money does Venmo make from each service?

Out of the ~$148 billion in transactions between users – how many users are actually using instant transfers (1% fee) and sending money with credit cards (3% fee)? How many have Venmo debit and credit cards?

Although PayPal has not released this information, Venmo’s yearly revenue is available.

Here is a snapshot of Venmo’s revenue in 2018-2020:

  • 2018: ~$200 million
  • 2019: ~$300 million
  • 2020: ~$450 million **

** Projected revenue by PayPal

Note: While Venmo is still not a big moneymaker for its parent company PayPal. With Venmo’s year-over-year growth, in users, transaction volume, revenue, and an expanding product line, it’s safe to assume Venmo is headed towards becoming a mammoth in the fintech industry.

Venmo projected active monthly users by 2024

From the chart above, Venmo is projected to hit ~70 million, active users, by 2024. Which, if all of their fees and services stay the same, would be projected to hit roughly ~$1 billion in annual revenue.

What is the Venmo business and revenue model?

Draw you in with “free” and up-sell you with small convenience fees.

Venmo is the master of the up-sell. What makes them masters of the up-sell is you don’t realize they’re doing it. At every turn, they offer a free option and subtly offer an optional, more convenient paid option that is cheap enough that the convenience is worth the small fee. (eg. waiting 1-3 business days vs instant transfer for 1%)

More users = (more transactions + debit and credit card users) = more revenue