PayPal doubles down on P2P payments

For rather a long time, PayPal has been inextricably wedded to eBay, the mammoth auction site. However, that relationship is in a state of flux, and this has prompted PayPal to look to new partnerships that may take its service in a different direction.

To start with it has paid $4 billion to buy Honey, a shopping rewards platform, and now it is looking at Venmo, a peer-to-peer mobile payments service. Essentially the company offers a digital wallet that allows you to make and share payments with friends. For example, you can easily split a restaurant bill or a cab fare using the Venmo app.

Venmo is distinctly different to PayPal, and yet it complements it, which is no doubt why PayPal’s board considered it such an attractive proposition. By having one partner that covers day-to-day purchases, whilst PayPal covers payments for larger goods, or payments for freelance work, and other types of transfers, it means that together, they more or less have a large swathe of the market covered.

The Venmo app has been showing considerable growth as well. According to its fourth quarter results, published at the end of January, “Venmo processed $29 billion in volume for the quarter, growing 56%. And for the year, volume increased to $102 billion,” PayPal’s CEO, Dan Schulman reported. He also said that it ended the year with 52 million active accounts and revenue in excess of $450 million.

It has grown significantly since its third-quarter figures, which showed it had 40 million active accounts. By the end of 2019 it also, according to PayPal, exceeded a projected $100 billion in payment volume.

How has this happened? Well, PayPal points to Venmo’s deal with Synchrony Bank, which has allowed it to add a credit card to its offering. Plus, Visa will be Venmo’s exclusive network partner for the Venmo credit card, Schulman has revealed.

Future plans for Venmo, that it is predicted will boost growth, include Venmo Rewards, a loyalty program it will run with selected merchants. Schulman told Donna Fuscaldo at Forbes magazine: “Last year, we saw brands like Netflix, Pepsi and Chipotle use Venmo payouts to reward their customers and pay them via Venmo. We are excited to introduce new monetizable value-added services to our Venmo platform over the course of 2020.”

What we can conclude from this is that PayPal’s new direction is heavily skewed towards the peer-to-peer (P2P) payment market, where Venmo is the market leader. That makes sense, and it’s surprising it hasn’t moved this way sooner. Here’s why. According to eMarketer, P2P mobile transactions will reach $396.48 billion this year, up 27.9% from $309.95 billion in 2019. Moreover, it is expected that will be 73.8 million P2P payment users by the end of 2020. And by 2030, who knows how big that user base will be!

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