On Tuesday, July 26th, the Uber of P2P payment apps, Venmo, announced that it was ending its in-app payments beta test with Munchery and Gametime and releasing the new feature to all Venmo users.  It also announced a host of additional e-commerce merchants where the in-app payment feature has already been integrated such as Parking Panda, Boxed, Delivery.com, and others.

In the world of in-app payments this may sound like a small thing…nothing more than a me-too occurrence if you will.  Realize that I can already reload the Starbucks mobile app on my iPhone with Apple Pay and Visa Checkout, so adding another in-app payment method is not that revolutionary. Except for the fact that the new in-app payment capability is from….wait for it…Venmo.  Yes Venmo.  The King of mobile P2P.  And Venmo is on almost every Millennials’ phone.  In Q1 2016, according to PayPal’s earnings release, over $3.2 Billion was transferred among consumers using the app, up by $1.26 Billion from the same quarter last year (Q1 2015).  To put that volume in perspective, the currently proposed 2017 budget for the state of Delaware is only $3.9 Billion.

This announcement is very important for Venmo, m-commerce merchants seeking to drive sales and PayPal’s new BFF, Visa.

First, by becoming an in-app payment method, Venmo will now have a source of revenue. It can charge merchants a fee for completing transactions.  This instantly makes the Venmo franchise more valuable to PayPal shareholders.  It’s especially important now that PayPal is a separate company from EBay.

Second, merchants can gain a new payment form that is wildly popular with consumers in general, and Millennials in particular.  Since Millennials tend to shun credit cards, this has left e-commerce merchants with little more than offering up debit card acceptance to consummate a purchase.  But now with Venmo in-app payments, merchants have a new tool.  Why is this important?  According to Javelin research consumers aged 18-24 conduct an average of 10.7 e-commerce purchases a month.  The 25-34 year old segment does 13.9 purchases a month.  In comparison, 45-54 year olds only do 5.4 per month and many of those are done with credit cards. So this new capability is critical to cater to e-commerce’s most prolific buyers.

Finally, there’s Visa.  We all saw the PayPal-Visa announcement last week.  While the media hypothesized what that agreement could bring to consumers, this Venmo announcement makes it real.  It’s where the rubber meets road.  The Visa agreement gives Venmo access to the Visa Direct service, allowing users to instantly load their Venmo accounts with a Visa debit card and go shopping.  No longer do consumers have to wait hours or days to load their Venmo accounts, but can do so moments before making in-app purchases.  This should drive significant growth for in-app purchases, especially among Millennials.

At the end of the day, it’s good news for consumers and merchants alike.  The real challenge remains with banks who continue to downplay the importance of P2P payments.  If they think the world of payments is passing them by, they need look no further than Venmo in-app payments.

Author

About Michael Moeser

Michael Moeser advises clients on improving the payments experience by anticipating customer needs amid the changing landscape of banking and retail shopping. His areas of expertise include cards, checks, P2P payments, B2C transactions, remittances, faster payments, digital commerce, mobile wallets, and merchant acquisition.

Before joining Javelin, Michael held executive positions at Visa, McKinsey, Capital One, and Ondot Systems. He has given presentations at conferences such as NACHA Payments, BAI Beacon, Card Forum, Power of Prepaid, and Mobile Payments. Michael has been quoted in many publications, including Forbes, the Wall Street Journal, Financial Times, American Banker, Chicago Tribune, Bloomberg, and Washington Post.

Michael holds a BBA in finance from the Ross School of Business at the University of Michigan and an MBA in marketing and entrepreneurship from the Kellstadt Graduate School of Business at DePaul University. 

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