How Does Venmo Make Money?

These days, handing your friend a $20 bill for a sandwich he just bought you and worrying about whether or not he has any small bills has become completely obsolete. Now, “Venmo-ing” has become a common phrase among Millennials and Gen Z as young people (and even some tech-savvy old farts) simply send money back and forth through the app. Almost everyone these days has Venmo, except for your one annoying friend who insists that you use Cash App, but almost no one ever pays any fees to use it. So how does Venmo make money?

As long as you send money from your Venmo balance, a linked bank account, or a debit card, Venmo won’t charge you anything to send your roommate your share of the electricity bill or whatever it is you’re sending money for. And while they will charge you a fee for sending money from a credit card, most people don’t do that. So where is Venmo getting its revenue from? 

Does Venmo Make Money?

There’s an urban myth going around that Venmo makes money by investing the money in your Venmo balance in securities, but that’s entirely untrue. In fact, at the moment, Venmo doesn’t generate a lot of income whatsoever for its parent company PayPal. However, Venmo is making moves to change that very soon. 

How Will Venmo Make Money?

Venmo’s plan for the future is to partner with other apps that will integrate Venmo as a payment system. In fact, they have already partnered with the food delivery app Munchery and the White Castle app, both of which allow you to pay through Venmo. The idea is that when someone pays through one of these apps with Venmo, they’ll get a slice of the revenue.

This is not a new idea. Every time you pay with a credit card through an app, that credit card company is getting paid too. And while Venmo’s stated rate of 2.9% plus a small flat fee is on the higher end of what credit card companies usually charge, the widespread usership of Venmo makes that a more lucrative deal for companies. 

But their usership isn’t the only attractive thing about Venmo for companies looking to partner with them, they’re also enticed by that emoji-laden social feed that most Venmo users rarely even look at. 

What about the Social Feed?

While the social feed may seem silly to a lot of Venmo users (you’re not going to scroll down your Venmo feed to see who’s paying who for tacos or whatever), this feature is actually a huge advantage for companies looking to partner with Venmo. 

Imagine this: you use your Venmo balance to pay for a couple of burgers through the White Castle app. Then, someone else opens their Venmo app for whatever reason, sees that you paid $20.59 to White Castle, and thinks, Hey, some White Castle burgers would really hit the spot right now! In that way, Venmo’s social feed serves as an advertising platform for the app’s partners. 

So, don’t worry, Venmo isn’t going to start charging you a bunch of money anytime soon. Their future business model to make money will be to take a cut out of their partners’ revenues in exchange for making it easier for customers to pay and for some inconspicuous in-app advertising via their social feed.