Chances are you’ve heard of Venmo, the mobile app that makes it easier to split your bill at lunch, pay back your friend for a cab, or settle up with a roommate for rent. Today, Venmo boasts over 200 million users and facilitates over $1 billion in transactions each month. Before Andrew Kortina and Iqram Magdon-Ismail launched Venmo in 2009, peer-to-peer payment platforms had been in existence for over 10 years. So why did Venmo grow in popularity among millennials so rapidly? Here are three reasons that might explain this phenomenon.
Number one, Venmo was a pioneer in social payments. By requiring users to connect their Venmo accounts to Facebook, it made it easier for users to sign up, find their friends, and generate Venmo’s virality. The company has accomplished a lot with very little advertising, thanks to the power of word-of-mouth. Venko adds an additional social angle through its newsfeed, were users can post creative content and drive engagement – it’s fun without feeling intrusive.
Second, one touch mobile payments provide a simple, secure way to perform transactions. Unlike your average online banking experience, where users must enter a password each time they log into an app (and sometimes resubmit their password every 15 minutes, ughh) , Venmo users only have to enter their password once. The app verifies your spending habits and provides you a way to quickly reverse any suspicious activity. If that ain’t enought, the user experience is so simple that even your grandma can use it [although she doesn’t, yet]. The Venmo team hasn’t tried to fill the app with features; instead, it has focused on making the core functionality simpler. Think of how little Google’s interface has changed over the last 10 years – keep it simple, stupid.
Timing was key to Venmo’s success, just like it is with any successful startup. Venmo placed a bet on mobile and won big. Today, competitors such as Google Wallet, Square Cash, and Payso all operate in the mobile peer to peer payments space. This past spring, Big Banks responded with their own version of Venmo, powered by Zelle, and Apple announced that you can now send money with iMessage. All of these solutions will be great options, but Venmo benefits from first mover advantage in mobile.
In 2012, Braintree aquired Venmo for $26.2 million and in 2013 PayPal aquired Braintree for $800 million. Over the last year, PayPal’s stock price has climbed from $34/share to $54/share, in part due to the strong upside potential of Venmo.