How Does Venmo Make Money?

Venmo has quickly become a popular way for people to send and receive money, splitting bills, and making purchases from their smartphones. But how does the company make money? Venmo, owned by PayPal, offers several features that provide revenue for the company, and we’ll explore those in this article.

Transaction Fees

One way Venmo makes money is through transaction fees. Venmo charges a 3% fee for credit card transactions, but debit card transactions are free. According to Venmo, their credit card fee is used to help cover the processing fees they are charged when users pay with a credit card. Alternatively, with the debit card, Venmo does not have to pay as many fees, so they don’t charge for using it.

Transaction fees have contributed significantly to Venmo’s bottom line, with reports saying that the company made over $200 million in revenue from transaction fees alone in 2019.

Instant Transfer Fees

Venmo’s instant transfer feature lets users transfer funds to their bank account instantly. This feature comes at a price, however. Venmo charges a 1% fee on instant transfers. This fee is charged with a minimum of $0.25 and a maximum of $10 per transfer.

While the fee may seem small, it adds up. In fact, reports show that in 2019, Venmo made over $40 million in revenue from instant transfer fees.

Venmo Card

The Venmo card is a debit card that users can link to their Venmo account. Users can then use the card to make purchases at merchants that accept Mastercard. Every time users use their Venmo card, Venmo earns revenue through swipe fees charged to the merchant.

Reports show that Venmo made roughly $30 million in revenue from swipe fees in 2019. While not a large portion of Venmo’s revenue, the Venmo card is still a profitable offering for the company.

Bill Payment Feature

Another way Venmo makes money is through their bill payment feature. This feature allows users to pay bills through the Venmo app. Venmo earns a percentage of the fee charged when users make payments through the app.

While the exact percentage Venmo earns is not publicly disclosed, reports show that Venmo made over $100 million in revenue from this feature alone in 2019.

Interest on Cash Balances

When users hold a balance in their Venmo account, Venmo holds that cash and may generate interest income on those funds. This interest income serves as an additional source of revenue for Venmo.

While the exact amount of interest income Venmo makes is not publicly known, the company has made it clear that they do generate revenue from this feature.

In-App Promotions

Venmo partners with different retailers and offers promotions within the app to incentivize users to spend money with these partners. Venmo earns a commission on sales made through these promotions.

The in-app promotions are a newer feature for Venmo, so reports indicating how much revenue they have earned from this feature is not readily available. Nevertheless, it still serves as a way for Venmo to grow its revenue.

Conclusion

Venmo is a popular app due, in part, to its many features that make the app easy to use. But, Venmo’s revenue model is also impressive. Venmo generates income through transaction fees and interest on cash balances. In addition, it provides extra incentives for users to spend money through its card and bill payment features, while also offering in-app promotions.

So the next time you use Venmo, remember the different ways the company is making money. Don’t hesitate to use their features and take advantage of the convenience the app offers.