Venmo may be slow to add cryptocurrency support behind Visa, Mastercard and even its parent company, PayPal — but it serves a younger and more tech-savvy audience that may be more willing to use digital currencies for payments.
Venmo will allow consumers to buy, hold and sell cryptocurrency inside the app for a fee that can be as low as $1. The most immediate impact will be a boost of 70 million users in PayPal's addressable market for cryptocurrency, which includes PayPal's base of nearly 400 million. While there's likely some overlap in those numbers, the main thrust for PayPal will come from Venmo's track record of appealing to younger users.
Venmo will bring cryptocurrency to new market demographics and underserved communities, a broader goal at PayPal. It will also enhance Venmo's diversification beyond transfers into check deposits and contactless payment cards.
PayPal's Venmo move comes shortly after Coinbase's public listing, which gives the crypto exchange the funds to expand into mainstream financial services, adding value for the large base of crypto investors that use Coinbase to invest in cryptocurrency. In an earlier interview, payments consultant Richard Crone said PayPal was among the firms that could combine crypto trading, payments and mainstream financial services for a large base of users.
Tiffany Hagler-Geard/Bloomberg
Square is also a major player, gaining more than half of its revenue from bitcoin trades to go along with its Square Cash P2P app and services for both consumers and merchants. The growing interest in cryptocurrency among young people provides Square, PayPal and Coinbase with the means to build traditional payments and financial services embedded in crypto wallets.
"PayPal and Venmo got into crypto following Square Cash's lead," said Talie Baker, a senior analyst at Aite Group. "Millennials and Generation Z are interested in crypto trading right now and Venmo puts it right in their hands and on their phones."
Venmo's social tools drive its fast growth, wrote Katrin Zimmerman, managing director of TLGG, in a recent PaymentsSource Paythink column, adding that this trait positions both Venmo and PayPal to not only capture younger consumers, but respond quickly as these consumers add wealth and require new financial services or payment options.
“Venmo’s announcement is another step forward for the acceptance of crypto payments into the mainstream. It's one of the most popular applications for peer-to-peer payments, and will act as another convenient on-ramp for retail users to gain exposure to cryptocurrencies," said John Wu, president of AVA Labs, a blockchain development firm.
PayPal did not return a request for comment by deadline. Venmo's crypto program provides information and education for the uninitiated, such as in-app guides, videos and other digital venues to ask questions about cryptocurrency. Venmo will support bitcoin, Ethereum, Litecoin and Bitcoin Cash. Social networking will be a major part of its strategy, allowing users to share details of transactions through Venmo's feed. In a release, Darrell Esch, senior vice president and general manager of Venmo said the product is a "new way for the Venmo community to start exploring the world of crypto."
PayPal's cryptocurrency support commenced in October 2020, following its receipt of a BitLicence from New York and a partnership with Paxos (which is also Venmo's partner) to speed delivery of new products. PayPal more recently added a checkout feature that supports purchases at PayPal merchants through the same cryptocurrencies Venmo is enabling.
"I'll be interested to see how Venmo will expand the cryptocurrency options to make peer-to-peer crypto payments more economical, and timely, as we see with newer platforms that can achieve Visa-level speed and throughput," Wu said.
Other mainstream financial services firms and technology companies support for cryptocurrency, bringing new attention to bitcoin and other crypto. Mastercard will support payments for some cryptocurrencies, though it will likely focus on stablecoins.
The increased focus on cryptocurrency from investors and payment companies still has to translate to widespread merchant support for direct retail payments, which has yet to develop. Aite's Baker said the main direct crypto payments will likely be P2P transfers for now.
"PayPal has become a key driver providing accessibility to crypto to millions of consumers," said Tim Sloane, vice president of payments innovation at Mercator Advisory Group, adding widespread merchant adoption for direct payments hinges on factors like the large number of fee-extracting exchanges involved in crypto transactions, making the conversion cost too high for merchants. "As with gold, a 'buy and hold' investment can drive wide adoption but by itself will not establish a new currency."
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April 21, 2021 at 01:43AM
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Venmo primes a younger crowd for crypto payments - PaymentsSource
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