How Does Venmo Make Money? (Explained)

What is Venmo?

Venmo is an electronic wallet and digital payment service that can help users transfer money with a few taps. Its social media-like interface makes it different from the rest of the transaction apps. Transactions look like social interactions with comments and emojis.

How Does Venmo Make Money?

So how does Venmo makes money? Because creating an account using Venmo is free, how come the organization is making money? The app has developed a unique and strong business model that helps them make money, keeping the fee structure low.

Fee on Credit Card Transaction

The first method is using a credit card. Venmo allows users to connect to a bank account or use a debit or credit card to link the payment system with their Venmo account.

Venmo offers two types of account systems. One is their Venmo balance from the bank account or credit card within the app.

If the users choose the Venmo balance, there is no transaction fee. But if the user chose to pay through their credit card, then there is a small percentage of the total transaction that Venmo generates. It is approximately 3% of the total transaction value that Venmo takes.

Fees to Businesses and Merchants

Similarly, the other method is the merchant fees. All merchants that are using PayPal and accept payments through PayPal are now accepting through Venmo. For that, 3% of the total payments received by the merchants go to Venmo using a credit card.

Venmo makes money by charging authorized merchants almost 2.9 percent of the total value of the goods, products, or services purchased by the consumers. Businesses are charged 2.9 when the client makes a payment. Also, 30 cents is charged to businesses when there is a transaction.

Even after these charges, businesses continue to use Venmo as their transaction app because of its interesting social feed that allows users to advertise to a targeted audience. Thanks to PayPal, Venmo is compatible with almost two million merchants.

Using the money in accounts to generate Interest

Venmo also makes money through the interest of the whole user’s balance, which is kept as Venmo Balance in the app.

Withdrawal and Instant Cash Transaction Charges

Venmo also makes money when withdrawals are made through the application. Venmo deducts a fee of 1%, as low as 25 cents, and as high as 10$ on withdrawals or instant cash transfers.

Younger Audience Attraction for Marketing Companies and Businesses

Due to the many young audiences on the Venmo app, businesses and brands target this application, and they don’t hesitate to pay minor transaction charges when youngsters purchase their service or product.

Social Feed-Like Interface

The interface is a treat for the marketing teams as the interface is a social feed that shows every transaction of the members as a social media update. It encourages friends in the circle to purchase similar items or the same item that their friend has just purchased.

While Venmo is not getting huge profits, it is also not drowning in debt. The bottom line is that Venmo is making money through millions of transactions, the money kept in the money account, the delay in the transactions for a couple of days from bank to bank, and charging the merchants for their products and services.

Also, with credit card transactions. There are so many ways through which Venmo is making money and generating revenue.