Venmo Inc. has lifted the “Invitation Only” sign off of its social mobile-payments application, hoping to expand quickly a person-to-person payment system that already accommodates as much as $10 million in transaction volume per month.
The free Venmo payment application for Apple Inc. iPhones and Google Inc. Android handsets became available to the general public March 20, marking the end of a two-year testing period for the New York-based mobile-payments company.
In doing so, Venmo has a chance to prove that timing is everything in mobile payments.
By testing the software for two years before public release, Venmo either was very wise or very lucky, Ron Shevlin, senior analyst with Boston-based Aite Group, tells PaymentsSource.
“For a long time, any vendor in the mobile-payments space had demographics working against them because they were heavily skewed toward Baby Boomers and senior citizens,” Shevlin says. Consumers in those age groups tend to use cash or checks to complete P2P payments, he adds.
But now, Generation Y consumers who grew up with digital technologies and would be more inclined to embrace P2P payments from mobile phones are reaching the ages of 21 to 30, Shevlin notes.
In addition, companies such as Venmo began to realize consumers relate more to what the technology can be used for instead of its delivery method, Shevlin suggests.
“Tell people it is easy to pay the babysitter, pay a bill, pay the gardener, split a bill at dinner, or send birthday money, and they will relate to that,” he adds.
Venmo executives expect consumers to use the mobile-payment setup to exchange small amounts in numerous scenarios and enjoy the Facebook-type social-messaging capability.
After downloading the application from the Venmo website, consumers set up Venmo accounts linked to either a bank account or to a credit card account, Venmo co-founder Andrew Kortina tells PaymentsSource.
“When you receive a payment, it goes into your Venmo account balance,” Kortina says. Consumers sending funds from a Venmo account essentially withdraw the value from their own bank account, he adds.
Venmo pushes the social-interaction concept as much as the P2P payment capabilities, saying its users enjoy sharing “payment notes” with friends.
“Every time a user pays someone, he enters an amount and a note to the person,” Venmo co-founder Iqram Magdon-Ismail tells PaymentsSource.
The amount of the transaction remains private, but users can choose to share their payment notes on Venmo's network to show up in their own or in friends’ news feeds, Magdon-Ismail adds.
Users share a majority of Venmo payments notes on the Venmo network or on Facebook or Twitter, he adds. Those notes tend to relate to the payment, whether it is for a birthday or Christmas present, splitting a dinner bill or paying a handyman for house repairs.
Venmo users have a weekly $2,000 limit on payments funded through a bank account and a $2,000 per month limit on payments through a credit card account.
Kortina says Venmo emphasizes transaction security with “bank-grade security systems and proprietary algorithms” to protect personal identity, prevent unauthorized transactions, or access to a consumer’s personal or financial information.
“We take security so seriously that we guarantee all user funds against any unauthorized transactions,” Kortina notes.
Venmo lists Accel Partners, RRE Ventures LLC, Greycroft Partners LLC and Lerer Ventures as partners providing capital and advice in the venture.
The company charges customers a 3% transaction fee on any payment initiated through a credit card account, but payments through a bank account are free, Kortina says.
“Right now, we are not focused on revenue because we are building out our user base and making sure that Venmo is the best payment service out there,” he adds.
Venmo has some key factors working in its favor in opening the service to the public early in 2012, Shevlin suggests.
“The fact that they spent two years proving the concept would work, plus having the cash now to keep it going, are really good signs,” he says.
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