How Venmo Became a Verb
And surpassed $100 billion in transactions volume in the process
It was a glorious time. I was barely of my twenties. I had just moved to New York. I was Instagramming the bridge (we know which one) on the daily and swinging around subway poles with great, misplaced adoration.
But I was also new to a life of rent, wash and fold services, and general survival on one’s own (laughable) first income. What my many, many #lifeinnyc posts didn’t show to others at the time was that I was probably straight-up collapsing into poverty. Turns out jaunting around the city to every group dinner invitation (LOL @ separate checks) and aggressively exploring entertainment options around you gets real expensive, real fast.
So I suppose the point I’m trying to make here is that Venmo is the reason I still have friends. And you know it’s true for you, too.
Can you Venmo me for the instant ramen?
Venmo processed $100 billion in payments in 2019, up from $62 billion in 2018.
Since its inception as a peer-to-peer transaction service in 2009, Venmo has achieved the success story Silicon Valley collectively dreams of: it is now used as a verb in everyday conversation (eat your heart out, company named after GOOP’s first-born).
I decided to take a closer look at the case through the lens of pirate metrics and put some structure around the platform’s meteoric rise.
AARRR!: A Closer Look
(Awareness and) Acquisition and Activation
Around 2016, Venmo started the “Blank Me” campaign and the ads were exceptionally compelling. Using new media platforms like Instagram and old-world mediums such as billboards, coffeeshop koozies, and the real estate on various transportation vehicles, Venmo started to lean into its somewhat cemented image as a brand. Clean white text emerging from the familiar sky blues emphasized the urgency of splitting, sharing, and paying (™?) in workplace relationships, friendships, and other misc encounters.
New user acquisition has heavily relied on word of mouth. I signed up for a Venmo account because I was sick of writing rent checks to my roommate who consistently told me to “Venmo” her. Most of my friends signed up for an account because I wore them down with constant texts and conversations about the service.
Soon my larger group of friends were exchanging payments on Venmo for dinner, surprise parties, and Airbnb rentals without even asking each other if we had an account. This was to be expected, as once activated into the experience, the user has several incentives to explore the practical nature of the app along with the perks of social media.
These awareness, acquisition, and activation tactics have proved to be very successful.
As of 2019, Venmo has over 40 million active user accounts, which is more users than some of the largest U.S. financial institutions: Bank of America Corp. reported it has 37 million active users while Wells Fargo reported 29.8 million.
Retention
Repeat usage and how engaged these users are really define the “stickiness” of an app — especially in early stages. For a service that acts as a concierge for one of the driest topics on the planet, Venmo has cultivated quite a following. How have they managed this feat?
1) Bless the newsfeed. Want to catch up with your friend but too tired to text? (We are that generation now, I don’t know what to tell you) Simply scroll through your feed.
2) Emojis! Overall, 30% of Venmo transactions include at least one emoji. For most of us, this is the the highest form of self-expression and creative release we will achieve in our lives.
3) Notifications. That cha-ching! sound when your payment is completed by a friend. Is there anything sweeter!?
Referral
Until recently, I have rarely paid attention to the referral experience of, well, anything — digital or physical. When you build and manage a referral product, however, you tend to pay attention. It’s a fascinating game, especially if done organically, completely eliminating the feeling of deviating from a meaningful and intended experience.
While passive referral has been led by word of mouth (see acquisition), active referral experience has mainly relied on two features:
1) Invite by phone number or email. Least amount of steps for an immediate feeling of reward. I personally love to never pay anyone in cash ever so the more people I bring on, the easier life is for me. And I suppose them. But mostly me.
2) Email payments to new users. Who doesn’t want free money? Sign up and ease into the sign up process to get to your money!
Revenue
But let’s address the big question: how does Venmo actually make money?
Currently, in two ways:
1) Credit card fees: Venmo doesn’t charge the user if they transacts using their Venmo balance or through debit card or bank account. There is, however, a 3% fee of the total value of the transaction if they pay using a credit card. Overtime, this can add up to be quite significant.
2) Merchant fees: Regular users will notice the bar on the top of the home screen that list the merchants who now accept Venmo as a source of payment. The vast number of merchants that accept PayPal, Venmo’s parent company, are now fair game. These merchants pay a 2.9% fee. Cha-ching, indeed.
What’s Next?
God help me for saying this, but ML allll the way! Machine learning can solve the most complicated of payment problems via basic category recognition.
This is something I will shout from the rooftops:
REDUCE the number of steps your user needs to take to complete their goal and you will have the greatest romance of your life.
I mean, a happy user. You will have a happy user for life.
Two of the most common scenarios for Venmo are group get-togethers and major household payments, like rent.
1) An automatic tip/ sales tax calculation feature, based on geo-location services or the description manually entered, would be something that would legit make me cry tears of pure joy. USE ME AS A BETA TESTER, VENMO, GIMME!
2) Reminders of rent or regular payments. If you’re a user that usually pays the same amount of money around the same time at regular intervals to the same user, you should not have to do the extra work to enter the amount, type in the user’s name, and type in a description again. AND AGAIN. This should be automated for you so you can rest easy.
By all indications, Venmo is playing a very strong and carefully planned long game.
By exposing payments, merchants, activities, and the users who make this all happen, the app has become one of the most powerful influencers of transactions behavior among millennials today.
With access to all of this data, Venmo is at the forefront of transforming the payments space in the most amazing way.
… Probably.
