PayPal acquired Venmo, a payment app popular with the younger generation, as part of its $800 million acquisition of payment processing startup Braintree in 2014. Now Venmo is one of the shining stars in PayPal's portfolio, according to PayPal CEO Dan Schulman.
Venmo, a mobile app that lets users send money to each other instantly, is a lot like PayPal's core service. People can use it to pay back their friends for dinner or pay their share of the rent.
Venmo handled $7.5 billion in transactions in 2015, and in January 2016, it had its first $1 billion month.
Schulman, speaking at Fortune's Brainstorm Tech conference on Wednesday, admitted that millennials may be confused about the relationship between PayPal and Venmo. He recalled a college student who came up to him after a speech he made at New York University and who told him that Venmo was far better than using PayPal.
The student didn't know that PayPal owned Venmo.
"I'm okay with that," Schulman said, laughing.
The secret sauce of Venmo is turning a transaction into an experience," Schulman said, adding that Venmo was the third most popular mobile app downloaded last year. "It's almost ubiquitous among millennials."
More recently, PayPal started making money from Venmo by allowing merchants to accept Venmo as a payments option. Merchants like food delivery service Munchery and event tickets seller Gametime are now able to accept Venmo payments from customers who place orders through Venmo's iPhone apps. Those merchants are charged a small fee for each transaction.
"We are being wise and thoughtful about monetizing Venmo," Schulman said. "We want to make sure we aren't putting the wrong metrics on it."