How Venmo is angling for a greater piece of checkout

As PayPal looks to shift its position from a processing company to a commerce company, Venmo is a critical part of the growth strategy. This year, PayPal has started bundling Pay with Venmo with PayPal Checkout, meaning merchants that use PayPal to process all their checkout transactions can deploy it as a payment option. Since Venmo is free to use as a peer-to-peer service, an increased focus on winning over e-commerce merchants and their customers means PayPal can reap the transaction fees.

On the customer side, Venmo is heavily marketing to consumers. One recent email to Venmo users who have used it to pay for an online purchase invites them to check out what other brands use it as well.

PayPal declined to share exactly how many companies use Pay with Venmo or how much the service has grown this year. And the company doesn’t currently split out how much revenue it sends to the bottom line. However, just 8% of Venmo’s active monthly users are also active monthly Pay with Venmo users, indicating that millions of customers have yet to make the link between their Venmo accounts and checkout pages.

Chriss said during the company’s third-quarter earnings call in October that PayPal aims to transform Venmo from a peer-to-peer service to “a central part” of consumers’ financial lives. “We know that we inherited one of the strongest P2P brands and see an opportunity to prioritize innovations that unlock Venmo’s value,” he said. “We believe that Venmo will eventually have multiple monetization levers.”

Chriss took the helm at PayPal in August 2023, following 19 years at Inuit. Part of his charge has been to transition the company from a payment processor to a broader digital payment platform, and his tenure has included cutting jobs, implementing AI and adding both PayPal and Venmo to more e-commerce platforms. In September, PayPal announced that it had struck a deal with Shopify to get it added as an additional payment processor for Shopify Payments in the U.S.

In October, PayPal reported $7.8 billion in net revenue, compared to $7.3 billion in the third quarter of 2023, and a 14% increase in profits.

Chriss also said during the company’s last earnings that it is marketing Venmo “for the first time in years” as it seeks to spread the word about the product changes. As of the third quarter, the number of Pay with Venmo active customers was up 20% from the prior quarter.

Looking ahead, the company has two levers to pull to increase growth. One is getting more people to use the Venmo debit card, which can be used to spend a Venmo balance online or in person. As of October, the company said about 5% of active Venmo users are monthly debit card users. However, the other avenue is Pay with Venmo, which requires buy-in from retailers to offer the service as a payment option and pay its transaction fees.

Barbara Hagen, vp of sales and marketing at Thriftbooks, said the online used bookseller added Venmo as a payment option over a year ago. Though she couldn’t share what percentage of sales are paid for with Venmo, she said adoption has been strong, and the service has the potential to help convert new customers.

“One of the reasons we did it is because we thought of the mobile-first world we live in these days,” she said. “People are always shopping on their phones a lot more than a desktop. Venmo is a great solution for that because it’s easy to utilize when you’re on a mobile device.”

For merchants, the addition of Venmo could be a tool to deter cart abandonment. If someone is a Venmo user, they can connect their account from the Thriftbooks checkout to pay out of their balance — meaning they don’t have to go track down their credit card and leave the transaction unfinished.

Another added bonus for Thriftbooks was the demographics of Venmo’s user base. Venmo has a massive customer base of 60 million active monthly users, and the vast majority are Millennials and Gen Zers, who tend to show a preference for digital payments. Digital wallets are currently used by around 57% of U.S. shoppers over age 14, a number expected to hit nearly 68% by 2028. Some research shows that people won’t shop somewhere if they can’t use their digital wallet — or that they’ll spend more if they can. 

“It’s really about the customer having a better experience overall when we can offer something they know and prefer to use,” Hagen said.

Poshmark added Venmo as a payment option back in 2016. The company wouldn’t share how often it’s used or whether its Venmo shoppers are more likely to spend more or more often than other customers. But the company’s vp of fraud and payments, Robbie Fritts, told Modern Retail in an email that “a prominent number” of shoppers use it. “By offering Venmo as a payment option, we’ve been able to connect with a younger demographic and cater to the evolving preferences of our community,” Fritts wrote.

PayPal’s own research shows shoppers are 19% more likely to complete a purchase with Venmo over traditional payment methods. In 2022, the company published a survey of more than 300,000 U.S. shoppers that analyzed more than 3.4 million transactions. It found that Venmo users shop more than twice as often as average shoppers. The study also found nearly half of digital wallet users will abandon a purchase and shop at a competitor if they can’t use their digital wallet.

The service doesn’t necessarily work for all brands, though. Amazon stopped its Pay with Venmo option last December. Though the reason wasn’t initially clear, PayPal has since been added to Buy with Prime.

In June, eBay became one of the largest retailers to add Pay with Venmo this year. Avritti Khandurie Mittal, eBay’s vp and gm of global payments and financial services, said the company sees payments as a key growth pillar as it tries to tap new audiences, particularly younger shoppers. It’s previously added digital wallets like Apple Pay and Google Pay. In several markets, like Germany and Australia, it’s added buy now, pay later services.

But Khandurie Mittal said Venmo, in particular, made sense for eBay’s U.S. shoppers because of its core younger demographic. “So far, we’re seeing great transactions,” she said. “We are seeing a meaningful amount of transactions and new customers coming to eBay through Venmo.”

Khandurie Mittal also said that Venmo is an attractive payment option for customers because of how mobile-friendly it is, another area of eBay’s business that’s on the rise.

“It all boils down to the customer need for relevance and value,” she said. “Make it easy, make it fast so that we don’t lose the customer and lose the conversion.”