Venmo Crypto, Budgeting & Savings - New Integrations

Venmo's Evolution: Expanding Beyond Mobile Payments

Significant changes are anticipated for the Venmo mobile payments application throughout 2021, as it progresses towards offering services more akin to those of a neobank. These expansions will encompass features for budgeting, saving, and cryptocurrency trading, as announced by Venmo’s parent company, PayPal, during its fourth-quarter earnings call on Wednesday.

Integrating Shopping Tools and Cryptocurrency

PayPal intends to leverage its $4 billion acquisition of Honey by incorporating its suite of shopping functionalities into the Venmo app. This will include access to merchant offers, exclusive deals, price tracking capabilities, and personalized wish lists.

The company had previously indicated its plans to integrate cryptocurrencies into Venmo. Last November, PayPal initiated support for cryptocurrency buying, selling, and holding within the U.S., facilitated through a partnership with Paxos Trust Company, a regulated crypto services provider.

A similar feature set is scheduled to be implemented within the Venmo application during 2021, a timeline that PayPal has now reaffirmed.

New Investment Options and Neobank-Like Features

In the coming months, Venmo users will be granted the ability to buy, sell, and hold cryptocurrencies directly within the mobile app. Alongside this, other “investment alternatives” will become available. (This refers to PayPal’s collaborative efforts with central banks in the development of blockchain-based digital currencies.)

Further modifications to Venmo suggest a move towards direct competition with neobanks. PayPal will collaborate with financial institutions this year to introduce budgeting and saving tools, as well as bill payment options, within the PayPal ecosystem – features commonly found in contemporary mobile banking applications.

Savings Features and FDIC Insurance

The upcoming savings feature on Venmo will mirror PayPal’s existing PayPal Cash Plus account, which partners with financial institutions to provide FDIC pass-through insurance. Currently, funds in the Cash Plus account are insured only if customers possess a PayPal Cash Card debit card, have enrolled in Direct Deposit, or have established Goals within their account. Venmo is now positioned to offer a comparable service.

Honey Integration Details

The integration of Honey, long promised by PayPal, is now being detailed. Both the PayPal and Venmo platforms will incorporate Honey’s features – including wish lists, price monitoring, deals, coupons, and rewards – during the first half of 2021.

This integration will enable merchants to deliver targeted offers and discounts to specific demographic segments of PayPal and Venmo users. PayPal’s two-sided marketplace will facilitate this, allowing the company to engage consumers earlier in the shopping journey – when they are actively seeking deals, comparing prices, or searching for products. Honey’s tools can then direct them to relevant offers, with the final transaction completed through the Venmo app.

The Impact of E-commerce Growth

These new tools are being launched during a period of accelerated e-commerce growth, driven by the pandemic and resulting shifts in consumer behavior. Store closures and government lockdowns have forced more commerce online, and some consumers now prefer online shopping due to safety concerns regarding in-person retail environments.

This surge in e-commerce and “contactless” payments contributed to PayPal adding 1.4 million new merchants in the quarter, bringing the total to 29 million merchants interacting with nearly 350 million consumers.

Venmo's Growth and Future Outlook

Venmo’s total payment volume increased by 60% year-over-year to $47 billion, while its user base grew by 32%, reaching almost 70 million accounts. The company anticipates revenues approaching $900 million in 2021.

Venmo has been actively expanding its services beyond simple payments. Recent launches include its first credit card, which will be fully available by month-end, as well as QR codes for in-store purchases, business profiles, and features for processing stimulus checks.

A "Digital Wallet" Vision

However, Venmo does not currently aspire to become a full-fledged neobank. Instead, it envisions itself as a comprehensive “digital wallet.”

“The current digital landscape is rapidly increasing the demand for a digital wallet that integrates payments, financial services, and shopping,” explained PayPal CEO Dan Schulman to investors. “This year, our digital wallet will undergo more significant changes than ever before, substantially enhancing its functionality within a single, unified, and user-friendly application, which should notably boost consumer engagement.”

As these new features are rolled out, PayPal expects increased usage and payment volume for the Venmo app.

Schulman stated, “We anticipate a substantial shift in historical engagement rates, driven by the super app functionality within this digital wallet, extending far beyond just payments.”

Correction, February 4, 2021, 1 p.m. EST — Mr. Schulman’s comment regarding bill pay referred to a launch within the PayPal app in 2021. This was mentioned alongside forthcoming Venmo features, causing some initial confusion. The text has been updated to reflect this clarification.