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Venmo, the peer-to-peer (P2P) digital transfer service owned by PayPal, is official launch instant bank transfers following a pilot project held last summer. The new service requires a Visa or Mastercard debit card, and will allow users to instantly (within 30 minutes) cash out their Venmo balance for a fixed amount of $ 0.25.
It will not replace the existing free option, which takes more time, and will be rolled out to all Venmo users over the next few days.
This move represents a clear incentive for Venmo to catch up with the competition.
- Venmo needs to monetize while innovating enough to stay afloat in an increasingly competitive space. Venmo is not yet profitable for PayPal, which could prove to be increasingly problematic as its growth begins to eat into PayPal’s overall volume. And at the same time, the industry is becoming crowded, with a growing threat from Zelle Bank, which has access to 86 million users, the entry of Apple Pay, and the rapid growth of Square Cash, which is exceeding Venmo in the active growth of users. This means that the service must find a way to limit the churn rate and increase profitability, especially in a space that is sufficiently network dependent that the loss of a few customers can quickly multiply.
- Instant cash out isn’t perfect, but it has the potential to help. Customers want fast and convenient access to P2P funds. And as it offers faster payments, it becomes an essential service, especially since Square Cash and Zelle offer comparable offers. But the service, which is one in a series of steps Venmo is taking to keep pace with the rapidly changing space, could be too small, too late, as Zelle’s offering is free by default and Square Cash’s 1% fee makes it cheaper than Venmo if a withdrawal is less than $ 25 – well above the average P2P transaction value. And so, while offering instant withdrawal is essential, as it ensures that Venmo remains a comparable offer and could help limit the churn rate, it is unlikely to help on the monetization front, forcing Venmo to rely on other initiatives, such as business-to-consumer (B2C) payments, to become lucrative.
BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on P2P mobile payments that:
- Predicts how the P2P market will grow, and how much of that will come from mobile channels, through 2021.
- Explain the factors driving this growth and explain why it will come from increased usage, not increased spend per user.
- Evaluates why mobile P2P is not profitable for businesses and details several cases of attempted monetization.
- Evaluate which of these strategies might be the most effective and what companies need to leverage to be successful in the space.
- Provides context from other markets to explain changing trends.
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