Can Venmo’s playbook help cryptocurrencies succeed?

Cryptocurrency companies hope P2P transfers will prove habit-forming enough to convince consumers to try out a new currency.

The strategy is to replicate the success of Venmo, Zelle and similar apps. While Venmo still doesn't make money for PayPal, it’s very popular and serves as an introduction to other PayPal services, such as in-store payments. For example, if a Venmo user is shopping at a PayPal merchant, the checkout page will display the Venmo brand instead of PayPal's.

For cryptocurrency companies, the path is similar. Crypto companies are trying to maintain a low barrier to entry, with the use of gamification to attract new users.

The general lack of understanding around cryptocurrencies has left most consumers without an incentive to purchase, said Marshall Hayner, CEO of Metal, the San Francisco-based company behind Metal Pay, which allows people to use phone numbers to send instant P2P transfers.

“The biggest problem for crypto to solve is the use cases, making it something that is not only easy to use but fun to use,” said Hayner.

Metal rewards people with its MTL cryptocurrency for each transaction. Called “Pop,” the ML currency can be immediately converted to dollars, sent to another Metal user or held as an investment. Metal’s other app, Crumbs, supports cryptocurrency investment.

“Every cryptocurrency needs a way to transact, so there are a number of crypto wallets as well as other transactional mechanisms created by currency issuers and by third parties,” said Rick Oglesby, president of AZ payments Group. "In most cases, cryptocurrencies aren’t a very good replacement for [traditional] currencies. Ease of use is only one of many reasons for that, so it’ll be a while before crypto P2P captures significant volume.”

Metal is attempting to tie two uses of cryptocurrency, payments and investing. Cryptocurrencies are mostly treated as assets by investors who buy and store them, rarely using them to pay at stores.

One of the main hurdles toward people using cryptocurrency to pay is it’s hard to use, Hayne said. By creating an experience that’s similar to a traditional P2P app, Metal hopes to make the process less difficult to understand.

“Everybody knows Venmo, TransferWise and Revolut, so these are things that people are already doing,” Hayner said.

The stakes are high, given most cryptocurrency companies do not succeed. “The 5 percent that do prevail will change payments,” said Hayner.

The number of major retailers that accept cryptocurrency for payments is increasing, creating hope for companies that want to follow Venmo's example.

Another crypto startup, Hoard, is building a Venmo-style payment app that will execute and settle transfers in near real-time, as part of an eventual move to offer a fast payment card.

Hoard contends its system can execute P2P and commercial payments in one second, with less cost than a card payment, by updating the distributed ledger that supports the payment in real time.

“We want to bring the masses into a space where they re considering cryptocurrencies as money,” said Jason Davis, CEO of Hoard, which was founded in 2017 in the Cayman Islands.

Hoard's main product is a mobile wallet that stores cryptocurrencies, which can be spent, swapped and used for investments. Hoard also offers a robo advisor and a transaction protocol that supports international currencies, multiple blockchains and the integration of machine learning into investment tools.

"We'll be able to move money at the speed of Wi-Fi in a digital format no matter what the value is," said Davis, a former user experience executive at Wells Fargo.

By making it easy and fast to move cryptocurrencies, other payment types and currencies will follow, Davis said. "There will be a time when we never hold a dollar bill again."