PayPal announced a massive expansion for use of its Venmo payments app popular with millennials. The app grew as a quick way for customers to send each other money, but starting this week, Venmo users can also pay for e-commerce purchases with the app on millions of mobile retailing sites such as Lululemon and Foot Locker.
PayPal is leveraging its relationships to take payments with its main namesake service at about 2 million online retailers to expand the usefulness of Venmo, which it acquired in its $800 million purchase of startup Braintree in 2013. With the mobile checkout update, Venmo users can make a purchase on their phone at any retailer’s site that accepts PayPal, either with funds stashed in the app or split among other Venmo users.
“Now, Venmo’s ready for our favorite autumn to-do—holiday shopping. (Seriously, it’s never too early for presents. Or candy corn.),” Ashley Phillips, Venmo’s lead product manager for commerce, joked in a blog post announcing the new feature.
Analysts said the move should help expand Venmo’s market presence, which accounted for $8 billion worth of transactions in the second quarter, about double the amount from the prior year. Although Venmo doesn’t generate much actual revenue for PayPal yet, its transaction volume is growing considerably faster than the company’s overall volume, which increased 23% to $106 billion in the second quarter. The added usefulness also helps Venmo fend off new competitive threats, as Apple (AAPL) is adding person-to-person payments to its mobile payments system.
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“Consumers simply want to move dollars from one place to another whether that means sending those dollars to a friend or a merchant,” said James Wester, a payments analyst at IDC. “So it’s smart for PayPal to make Venmo more useful by expanding the opportunities for consumers to use it to move their dollars.”
The expansion is reminiscent of how PayPal (PYPL) successfully expanded when it was bought by eBay (EBAY), noted analyst Brendan Miller at Forrester Research. Users often had money sitting in their PayPal accounts after selling something on the site, so PayPal enabled them to spend the money more easily directly on the site as well, without needing to shift it to a bank account.
“It’s huge,” Miller said. “Money is sitting in all these Venmo accounts and now they can burn it off and it doesn’t have to get moved back to a savings account or a checking account.”