Venmo is not a moneymaker for PayPal yet, but that's not stopping the online and mobile payments giant from dreaming big about where its P2P service is headed.
Venmo's growth and its various add-on services understandably have PayPal putting a lot of weight behind the digital payment option, viewing it as a vehicle to drive the company beyond the record-breaking numbers it reported for the fourth quarter of 2018.
"Venmo is not in the black yet," CEO Dan Schulman said during Wednesday's fourth quarter earnings call. "Prior to some of the great progress in monetizing Venmo this year, we were providing a service that we were not monetizing in any way, and losses were growing as volume grew."
PayPal is viewing its development of Venmo in three phases, said Schulman, who did not disclose specifics of the P2P service's effect on company profit margins.
"The first priority for us was to stop that rate of loss and we have done that," he said. "The next phase for us is to get Venmo to break even, and that is not going to happen in the next quarter or two, but there is line of sight on that in terms of what we are doing."
Finally, PayPal will have to "really put our foot on the pedal" and drive profitability on Venmo at the same levels or higher than PayPal and its other services, Schulman said.
In that regard, the company is looking for Venmo to support or accelerate the types of numbers it reported for the fourth quarter and full year. PayPal generated $15.45 billion in revenue, up 18 percent from the previous year, its highest growth rate since separating from eBay.
In the fourth quarter, PayPal registered 14 percent growth with $4.23 billion in revenue, the first time in the company history's that it made more than $4 billion in a single quarter. However, that number fell just
The company added a record 13.8 million new active accounts in the fourth quarter, up 58% from the previous year. The 39 million new users for the year boosted PayPal's overall total to 276 million active accounts able to shop at 21 million merchants accepting the payment form.
For its part, Venmo delivered an 80 percent increase in dollar volume at $19 billion for the quarter, adding to a full year of $62 billion in payment volume processed.
"For the last two consecutive quarters, Venmo's total payment volume surpassed that of what we process from eBay," Schulman said.
Shopify, Hulu, BigCommerce and Jay Z's Tidal music service added Venmo as its P2P vehicle in the past year.
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Venmo is adding commerce-related options such as the Venmo plastic card, and Pay with Venmo online, said Bill Ready, executive vice president and chief operating officer at PayPal.
"We see each of those all growing really nicely, as well as the fantastic brands coming on with Venmo like Uber early last year, so we are really seeing the commerce side of Venmo gain traction," Ready said. "Many of these are daily, high-frequency-type actions, as well as with the card, which gets into everyday spend."
In other areas, Schulman also touted the company's growing relationships with banks, citing programs in which rewards points from Citi or Discover cards could be used as a tender type in the PayPal wallet. In the coming year, PayPal plans to add Chase, Amex and Barclays cards.
"It is estimated that nearly 10 billion in rewards points go unused by consumers in the U.S. alone every year," Schulman said. "Helping to address that issue is a huge opportunity for consumers and another way our platform is connecting consumers and merchants in unique and powerful ways."
In addition, PayPal plans to more aggressively establish marketplace partnerships and also enter the bill paying sector through an agreement with Paymentus, a paperless billing provider.
"PayPal will handle payment processing for Paymentus transactions, including credit, debit and ACH through our Braintree platform," Ready said, noting how a bill-paying platform would be created within the PayPal app.
