How In The World Does Venmo Make Money?

Every year, billions of dollars change hands in needlessly clumsy ways. Parents realize they’re short on cash and go out of their way to stop at an ATM so they can pay their babysitter; grandparents mail checks as birthday gifts, which take days to arrive and days to clear. Even as more and more of life is lived through a screen, paper is still how the vast majority of Americans give each other money.

In the past few years, a handful of tech companies have recognized these inefficiencies, introducing apps — such as Circle Pay, Square Cash, and Venmo — that let users transfer money to one another’s bank accounts using their phones, relatively frictionlessly. Among other things, they let users enter their bank-account information and then transfer money to others who have done the same. With Venmo, one of the more popular of these services, there is an additional wrinkle: Once money is transferred, the exchange shows up in the app’s social feed, a running record of who went out for drinks with whom, or whose roommate pays the electricity bill each month. (Users can elect to make a transfer private, but most don’t.) The app has among many — mostly young, city-dwelling people—attained a level of linguistic uptake reserved for the likes of Google and Uber: “Just Venmo me,” they say, after picking up a dinner bill.

The feature that sets Venmo apart is the social feed, which brings transparency to a class of transactions that used to be entirely private. The feed — an emoji-laden stream of often-indecipherable payment descriptions and inside jokes — seems frivolous; it is not a social-media destination in the way that Facebook or Twitter is. But as a public record, it is quite revealing of social dynamics — who’s hanging out with whom, and perhaps where. A friend of mine told me that Venmo proved invaluable in trying to determine if her ex and his new girlfriend were still dating.

RELATED: Why the Venmo Newsfeed Is the Best Social Network Nobody’s Talking About

The feature that sets Venmo apart is the social feed, which brings transparency to a class of transactions that used to be entirely private.
In other words, pointless and goofy as it seems, people do pay attention to what they see in Venmo’s feed. And there’s actually a way this parade of public transactions might give the app a significant advantage over its many competitors.

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