How Does Venmo Make Money?


Claire Yenson
Content Specialist
Claire Yenson is a writer with a passion for development and audience engagement. Claire graduated magna cum laude from Virginia Commonwealth University, where she studied marketing and management at… Read more

“I’ll Venmo you.” “No problem, I’ll charge you on Venmo.” “Can you Venmo her later?” Need to split a restaurant bill with friends, or charge a roommate for utilities? Thanks to Venmo, there’s no need to worry about finding an ATM, or pulling out your checkbook.  Though here at FXcompared, we focus on international payments, Venmo has caught our attention, thanks to wide usership.  Some FXcompared users have asked us, "How does Venmo make money without fees?"  Read on to find out.

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Using Venmo 

Once you have downloaded the Venmo app onto your smartphone and connected it to your bank account, simply type in the amount you owe, add a brief description of the funds (“for brunch”, “March electric bill”, etc.), and hit send! If processed before 7:00pm on a business day, the funds will be available in your account the very next day. (The process works similarly if you wish to charge someone for funds owed.) User friendliness has made Venmo increasingly popular and peer-to-peer financial transactions as easy as sending a text message. A particular reason for its popularity? Venmo is, for the most part, free. 

How Does Venmo Make Money? 

Sending money quickly and without a charge might make for a satisfied customer, but it does not necessarily lend itself to a lucrative business plan. So how does Venmo earn money, if not taking a percentage of personal transactions? The company, founded in 2009, has two primary revenue streams. The first is credit card fees. If you send a friend money through your linked bank account, the Venmo transaction is totally free, akin to handing that same friend cash from your wallet. However, if you were to use your credit card to send funds in the app, your card would be charged a 3% fee. The second revenue source is a merchant fee. If you order a pizza through, Delivery is charged a 2.9% + $0.30 fee for those anchovies.

In addition to its ease and convenience, Venmo’s appeal with the millennial generation is a social one. The default setting in the app displays what your friends are paying for and when. For businesses, this has the added bonus of free advertising, attracting more like-minded customers and generating more income.  

venmo makes money no fees

What Does the Future Look Like for Venmo?

 Venmo’s future is certainly a bright (re: profitable) one. Acquired by financial giant Braintree in 2012, Venmo processed over $17.6 billion dollars last year. Interestingly, Braintree also owns PayPal, a similar online payment system founded in 1998. Venmo appears to be developing at a much faster rate than its elder sister. In Q4 of 2016, PayPal reported a growth rate of around 25%, while Venmo boasted growth of more than 100%. In fact, Q416 was the company’s 14th consecutive quarter with a growth of over 100%. However, Venmo is not a large source of profit for Braintree. Though the amount of money processed through Venmo is a considerable amount, the majority of it is transaction free, which affects the company’s “take rate” - transaction revenue as a percentage of the total payment volume (TPV). In fact, as the company’s TPV as steadily increased over the past six years, Venmo’s take rate has actually declined with the same steadiness.

Braintree has ambitious plans to aid Venmo’s monetization, including an increase in both merchant partnerships and in-store payments. Venmo is currently partnered with a handful of businesses, including the aforementioned, bulk goods provider Boxed, and online consignment shop Poshmark. These partnerships are still very much in early stages, having been introduced less than a year ago. Braintree stands to gain major income, if these tactics are implemented successfully. Though mobile payments are becoming increasingly popular and prevalent, many consumers still heavily favor traditional payment options, fearing potential safety breaches. 

Preventing Fraud with Peer to Peer Payments

Perhaps the biggest setback to mobile payment growth is the fear of potential fraud or identity theft through unauthorized use. Venmo has had to significantly increase security measures in recent years. The company came under fire for its lack of security features. Early versions of the app were not linked to users’ email addresses, allowing scammers to transfer funds or change settings, with no notice given to the account holder. As little as two years ago, Venmo did not have a designated customer help line, only an email address with a slow response time. Since then, Venmo has begun implementing security features similar to the ones employed by banks. As you would at an ATM, you can now set up a personal identification number on Venmo that must be entered before sending funds. If your cellphone or tablet gets stolen, you can also block the use of the app on that device temporarily.

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