How does Venmo make money if people can send money to each other for free? Venmo is one of the most successful and popularFinTech-appsin the US, and while the most popular service is free, Venmo makes money, and lots of it.
So how is the company doing? This post explains how Venmo monetizes its popularitymobile app. If your organization is interested in creating onedigital paymentsolution, it's important to understand how successful apps can make money without driving users away with exorbitant fees and charges.
Let's take a closer look at the Venmo business model and explore the ways to do itmoney transfer serviceknows how to generate money.
Venmo
If you are not familiar,TheVenmo allows users to link their bank account or payment card to their profile and send money to friends, family or businesses. The app has been around since 2012 and was eventually acquired byFinTechgiant Paypal.
Venmo has made it easy to pay back friends, split checks, and send money to family in a world where people rarely use cash anymore.
There are several ways Venmo monetizes its app and services. Here are the top ways the Venmo app can monetize and make big profits:
- Pay with Venmo
- Exchange and withdrawal fees
- Instant transfers
- Check the redemption
- Interest
- Cashback-partners
Pay with Venmo
Pay with Venmo allows users to use their Venmo credentials or a card to pay for goods or services online, in other apps, and at select retail locations. The Pay with Venmo program is the company's most profitable revenue stream. There are many mobile apps that do not integrate with banking institutions, or users may not feel comfortable linking their bank account to a new app to send and receive money.
Pay with Venmo allows users to easily and securely link their Venmo account to their account on another app or website. For example, access to sports betting via mobile apps has expanded significantly in recent years; Pay with Venmo allows users to quickly fund their sportsbook accounts and cash out to their Venmo without having to enter all their banking information on every app they use.
Venmo charges retailers and other providers a similar fee as Visa or Mastercard for transactions using Pay with Venmo. Dealers pay 0.30 cents per transaction plus 2.9 percent of the total purchase. Businesses pay these fees because they know that enabling Pay with Venmo will increase their sales opportunities and attract more customers.
Exchange and withdrawal fees
In 2018, Venmo began issuing debit cards. Any account on the platform can request a Venmo card to use for daily transactions. When combined with the app, the bank card can easily share bills with friends on a night out, making it a popular and convenient option for users.
Mastercard manages the payment card offered by Venmo.When users use their Venmodebit card, Venmo collects interchange fees and shares them with Mastercard. In addition to charging interchange fees, Venmo also charges withdrawal fees when users use their debit cards to withdraw money from ATMs or financial counters.
Venmo charges a withdrawal fee of $2.50 for ATM withdrawals and $3.00 for over-the-counter withdrawal transactions. Exchange and withdrawal fees don't generate as much revenue for Venmo as Pay with Venmo, but these fees help the company make money from its debit card offering.
In addition to these fees, Venmo offers a Venmo credit card that allows Venmo to charge interest fees on late payments, cash advances, and merchant fees.
Instant transfers
When you transfer money from Venmo to your bank account, it takes a few days for the money to become available. But in 2019, Venmo introduced a new feature for those who are tired of waiting for their money to hit their bank account.Instant transfers were introduced, allowing users to receive their money within 30 minutes
While instant transfers are convenient for users, the Venmo feature also gives the opportunity to generate revenue. You can't directly transfer money to bank accounts for free on Venmo. Instead, Venmo charges 1 percent of the transaction amount for direct transfers. The minimum rate is 0.25 cents and the maximum rate for direct deposit is $10.
Users who want their money immediately must pay a convenience fee. This fee will allow Venmo to make more money and continue offering its peer-to-peer payment services for free. Additionally, instant transfer transaction fees encourage users to keep money in their Venmo accounts.
Cash check
With many people receiving government stimulus checks during the COVID-19 pandemic, Venmo introduced a new money checking service in 2021. To use Cash Control in the Venmo app, users must have a Venmo debit card or direct deposit enabled.
Venmo makes cashing a check easy. Users simply need to take a photo of the front and back of the check and it will be deposited into their Venmo account.Venmo generates revenue from its check cashing service by charging a 1 percent fee
To use check cashing on Venmo, the check must be for at least $5 or more. This convenient service positions Venmo to offer more services typically associated with traditional banking institutions.
Interest
Like all other financial institutions, Venmo uses the cash in accounts to lend to various organizations such as banks, investors, etc.Venmo earns interest on the money the company lends to other organizations
Interest income is a common way for financial institutions to make more money. But of course, your Venmo balance is FDIC insured, so you don't have to worry about losing your money due to Venmo's lending practices.
Cashback-partners
One of the main benefits of using a Venmo debit card is that you can earn cash back rewards at select merchants.Venmo earns a commission on sales through this cashback program.
Retailers who participate in the Venmo cashback program will likely attract more customers who want to partake in the savings. As a result, partner merchants pay Venmo a fee to be part of this program.
Final thoughts
Most people use Venmo's trusted peer-to-peer payment service for free, but as we've shown, there are several ways Venmo can make money. If your company is interested in building a FinTech app, Venmo provides a great example of how you can generate revenue while attracting users with a free service.
If you want to build a world-class financial app, you need a strong partner by your side. Hire an experienced persondevelopment partnerto discuss your ideas and learn more about what it takes to build a successful FinTech app.
