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Instant withdrawal is coming to Venmo

Venmo


Decision-making information


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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 organized 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 flat fee of $0.25.

It will not replace the existing free option, which takes longer, and will be rolling out to all Venmo users over the next few days.

This decision represents a clear incentive for Venmo to catch up with the competition.

  • Venmo must monetize while innovating enough to stay afloat in an increasingly competitive space. Venmo is not yet profitable for PayPal, which could prove increasingly problematic as its growth begins to eat away at PayPal’s overall volume. And at the same time, the industry is increasingly 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 East to go past Venmo in active user growth. This means the service must find a way to limit churn and increase profitability, especially in a space that is sufficiently network-dependent that the loss of a few customers can quickly multiply.
  • Instant withdrawal isn’t perfect, but it has the potential to help. Customers want quick and convenient access to P2P funds. And by offering faster payments, it becomes a must-have service, especially since Square Cash and Zelle have comparable offerings. But the service, part of 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 cashout is key, as it ensures Venmo remains a comparable offering and could help limit churn, it’s unlikely to help on the monetization front, forcing Venmo to rely on other initiatives, like business-to-consumer (B2C) payments, to become lucrative.

BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on mobile P2P payments that:

  • Forecasts the growth of the P2P market, and how much of it will come from mobile channels, through 2021.
  • Explains the factors driving this growth and explains why it will come from increased usage, not increased spending per user.
  • Evaluates why mobile P2P is not profitable for businesses and details several cases of monetization attempts.
  • Evaluates which of these strategies might be most effective and what companies need to leverage to succeed in the space.
  • Provides context from other markets to explain changing trends.

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