{"id":3555,"date":"2017-02-02T17:56:19","date_gmt":"2017-02-02T22:56:19","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/winner-venmo-the-next-generation-checking-account\/"},"modified":"2017-02-02T17:56:19","modified_gmt":"2017-02-02T22:56:19","slug":"winner-venmo-the-next-generation-checking-account","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/winner-venmo-the-next-generation-checking-account\/","title":{"rendered":"Winner: Venmo \u2013 the next generation checking account"},"content":{"rendered":"

Organizations in consumer financial services ranked third in being the most disrupted industry by digital; 61% of the surveyed C-level executives responded that their business would be moderately or massively disrupted in the next 12 months.[i]<\/a> Almost every kind of financial activity \u2014 from payments to retail banking to wealth management \u2014 is being re-imagined by startups (see figure 1), some of which have garnered large investments.[ii]<\/a> Worldwide investments in startups focused on retail banking markets rose to nearly $6.8 billion in 2015, more than triple the $2.2 billion in 2014.[iii]<\/a> Meanwhile, incumbent banks are trying to follow suit with new products and find a way to develop new platforms while overcoming legacy infrastructure.[iv]<\/a><\/p>\n

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Venmo, the PayPal-owned peer-to-peer payments app, is one of the best-known and largest disruptive fintech companies. It allows registered users to transfer money between one another through a \u201cdigital wallet\u201d using a mobile phone app or web interface, and integrates seamlessly with bank accounts and credit\/debit cards. Users have a Venmo balance that is used for their transactions; only if the balance is insufficient, Venmo automatically withdraws the funds from the registered bank account or card.[v]<\/a><\/p>\n

The open platform processed $17.6 billion overall in the past year (see figure 2). Q4 2016 marked the product\u2019s 14th consecutive quarter of more than 100% growth, and the platform hit both the $1 billion and $2 billion monthly milestones in 2016.[vi]<\/a> Furthermore, Venmo\u2019s brand value and recognition is very high \u2013 the app became even a verb (\u201cJust Venmo me\u201d).[vii]<\/a><\/p>\n

Venmo\u2019s transaction volume is even more impressive considering that currently just 25% of US adults used their mobile devices to send money to relatives and friends. However, the number is likely to keep increasing: Venmo is beginning to cross generations, as younger adults persuade their parents to use the smartphone app for sending money and splitting payments.[viii]<\/a><\/p>\n

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In contrast to Apple Pay and PayPal itself, the \u201cdigital wallet\u201d can be shared over a social network. Mimicking a social media feed, transaction details (without the payment amount) can be shared on the user’s news feed and to the user’s network of friends. Furthermore, its security is bank-grade; personal and financial data are encrypted and protected on secure servers to guard against any unauthorized transactions. Thus, paying with Venmo is considered safe, easy, fast, and entertaining \u2013 especially among Millennials.[ix]<\/a>, [x]<\/a><\/p>\n

While banks make much of their revenue these days from fees charged on various kinds of transactions, Venmo payments with a bank account or debit card are fee-free (credit cards have a 3% fee for each transaction). But since the app itself and the majority of consumer transactions are free, it isn\u2019t a profit-generator for PayPal. However, it helped Venmo attracting many users and allows collecting a lot of real world data about payment processing, giving PayPal an edge over Apple.[xi]<\/a> Going forward, PayPal has several options to monetize Venmo better: It could demand a fee for bank account and debit card transactions, which risks the alienation of (potential) customers. Alternatively, it could invest the money in the Venmo balance, which is challenging from a regulatory viewpoint, requires new investment skills, and is risky in a low-interest environment. Last but not least, Venmo could expand their new feature \u201cPay with Venmo\u201d, thereby monetizing merchants: With \u201cPay with Venmo\u201d, users are able to select Venmo as a payment option when purchasing on one of eleven partner apps, which include Boxed, delivery.com, and Munchery. For users \u201cPay With Venmo\u201d is free, but merchants pay a per transaction fee of 2.9% plus $0.30. It is expected that Venmo expands the program, allowing Venmo also to recruit a new customer base through merchant relationships and increasing customer loyalty by providing more and tighter ways for users to interact with Venmo.[xii]<\/a><\/p>\n

[i]<\/a> Rhys Grossman (Mar 21, 2016). The Industries That Are Being Disrupted the Most by Digital. 性视界 Business Review. https:\/\/hbr.org\/2016\/03\/the-industries-that-are-being-disrupted-the-most-by-digital<\/p>\n

[ii]<\/a> Evan Bakker (Feb 22, 2016). Technology is disrupting the financial services industry \u2014 here’s how. Business Insider. http:\/\/www.businessinsider.com\/technology-is-changing-the-financial-services-industry-2016-1<\/p>\n

[iii]<\/a> Steve Lohr (Jan 18, 2016). As More Pay by Smartphone, Banks Scramble to Keep Up. New York Times. https:\/\/www.nytimes.com\/2016\/01\/19\/technology\/upstarts-are-leading-the-fintech-movement-and-banks-take-heed.html?_r=0<\/p>\n

[iv]<\/a> Ibid. http:\/\/www.businessinsider.com\/technology-is-changing-the-financial-services-industry-2016-1<\/p>\n

[v]<\/a> Daniel Newill (Nov 39, 2014). Is PayPal\u2019s Venmo the Bank Killer App? http:\/\/marketmadhouse.com\/is-paypals-venmo-the-bank-killer-app\/<\/p>\n

[vi]<\/a> BI Intelligence (Jan 31, 2017). Venmo’s monetization will be worth watching. Business Insider. http:\/\/www.businessinsider.com\/venmos-monetization-will-be-worth-watching-2017-1<\/p>\n

[vii]<\/a> Felix Gillette (Nov 21, 2014). Cash is for Losers!\u00a0 Bloomberg. https:\/\/www.bloomberg.com\/news\/articles\/2014-11-20\/mobile-payment-startup-venmo-is-killing-cash<\/p>\n

[viii]<\/a> Steve Lohr (Jan 18, 2016). As More Pay by Smartphone, Banks Scramble to Keep Up. New York Times. https:\/\/www.nytimes.com\/2016\/01\/19\/technology\/upstarts-are-leading-the-fintech-movement-and-banks-take-heed.html?_r=0<\/p>\n

[ix]<\/a> Neelesh Moorthy (Mar 26, 2015). Cash, credit or mobile app: the rise of Venmo. The Chronicle. http:\/\/www.dukechronicle.com\/article\/2015\/03\/cash-credit-or-mobile-app-rise-venmo#.VTIK-eGzn6o<\/p>\n

[x]<\/a> Fiscal Today (Mar 11, 2015). Venmo: App to make and share payments. http:\/\/fiscaltoday.com\/venmo-app-make-share-payments\/<\/p>\n

[xi]<\/a> Ibid. http:\/\/marketmadhouse.com\/is-paypals-venmo-the-bank-killer-app\/<\/p>\n

[xii]<\/a> BI Intelligence (Jul 27, 2016). Venmo’s latest feature is now available to all users. http:\/\/www.businessinsider.com\/venmos-latest-feature-is-now-available-to-all-users-2016-7<\/p>\n","protected":false},"excerpt":{"rendered":"

Venmo, the PayPal-owned peer-to-peer payments app, is one of the best-known and largest disruptive fintech companies.<\/p>\n","protected":false},"author":833,"featured_media":3556,"comment_status":"open","ping_status":"closed","template":"","categories":[146,1160,388],"class_list":["post-3555","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-fintech","category-monetization-difficulties","category-venmo"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-losers\/","yoast_head":"\nWinner: Venmo \u2013 the next generation checking account - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/winner-venmo-the-next-generation-checking-account\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Winner: Venmo \u2013 the next generation checking account - Digital Innovation and Transformation\" \/>\n<meta property=\"og:description\" content=\"Venmo, the PayPal-owned peer-to-peer payments app, is one of the best-known and largest disruptive fintech companies.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/winner-venmo-the-next-generation-checking-account\/\" \/>\n<meta property=\"og:site_name\" content=\"Digital Innovation and Transformation\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2017\/02\/Venmo.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1100\" \/>\n\t<meta property=\"og:image:height\" content=\"733\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/winner-venmo-the-next-generation-checking-account\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/winner-venmo-the-next-generation-checking-account\\\/\",\"name\":\"Winner: Venmo \u2013 the next generation checking account - Digital Innovation and Transformation\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/winner-venmo-the-next-generation-checking-account\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/winner-venmo-the-next-generation-checking-account\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2017\\\/02\\\/Venmo.jpg\",\"datePublished\":\"2017-02-02T22:56:19+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/winner-venmo-the-next-generation-checking-account\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/winner-venmo-the-next-generation-checking-account\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/winner-venmo-the-next-generation-checking-account\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2017\\\/02\\\/Venmo.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2017\\\/02\\\/Venmo.jpg\",\"width\":1100,\"height\":733,\"caption\":\"The Ebay Inc. 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