Venmo: Braintree: Paypal, is to, Social: Mobile: Payments

Braintree, the Chicago based online payment services developer, was recently acquired by PayPal in an $800 Mn deal. This acquisition by Braintree included Venmo, an e-payment company which focuses on peer to peer payments.

The Venmo app was launched in 2009 by Andrew Kotrina (CFO) and Iqram Magdon-Ismail. Venmo received $1.2 Mn in funding via investors including RRE Ventures, betaworks, Founder Collective, Lerer Ventures, Accel Partners, Greycroft Partners etc. The company was acquired by Braintree in August 2012 for a sum $26.2 Mn. We checked that there has been no change and Venmo continues to work as it did before the acquisition.

Venmo claims to enable consumers to make and share payments with their friends for utilities, rent, dinner, movies, drinks, coffee, tickets, birthdays, etc. through their smartphones:

  • The service is used to share payment data on a social platform in a similar manner to how people share photos and news on Twitter.
  • If a consumer wants to pay back a friend for dinner or such, he is required to open the Venmo app, select the appropriate contact from his friends list, add the dollar amount and send.
  • Before the transaction is completed, Venmo prompts the user to ask what the payment is for - Users could write Dinner at Dominoes or Coffee at Starbucks.
  • These annotations are public by default. They are visible to those involved in the transaction as well as the user’s friends on Venmo.

'It became this record of all the things that we were doing--the people we were hanging out with, the places we were going--and it started to look a lot like a news feed,' says Venmo’s CEO, Andrew Kortina. 'Many think payments are a private thing, but if you think about it, the things you spend money on with friends are: going to restaurants, concerts, ski trips, birthdays. These are the things you would actually talk about the next day over the water cooler at work, so it's natural people want to share.'

Venmo has risen from a download ranking below 1500 to reach the top 300 apps in iTunes store according to App Annie. In the finance category, the app has grown to reach the top 10.

In October 2013, the company launched its Venmo Touch to merchants and consumers in UK. Venmo touch enables users to store credit/debit information and payment details on a single app. It allows checkout across Venmos network of apps in one touch. HotelTonight, Drivr, LivingSocial, Bizzby, YPlan, TaskRabbit, Wrapp, Belly and Simple are some of the apps to have adopted Venmo. The businesses get convenience for their customers, and for that Venmo charges the companies a 2.9% transaction fee.

Hailo, a hailing cabs app, recently utilized Venmo to send $10 and a thank you note to a customer. On their social feed, Venmo received several likes and comments for the post. It was visible to the user and user’s friends. Businesses such as Hailo are charged at 25 cents per transaction by Venmo.

LTP View: Venmo’s business model which integrates payments with social media sets it apart from competitors in the e-payment space. People like to share everything, its an evolution in terms of how much you can really share. Everytime you progress by two more steps. Charging no fees to receive money or make payments from debit cards or bank transfers also gives Venmo an advantage. The significant growth of the company could be attributed to highly rated user experience. Venmo aim was to become a payment platform like PayPal with the social reach of Facebook. So the acquistion of Braintree and in turn Venmo is good for all. Paypal wanted greater dominance in the mobile space and Braintree/Venmo provides that.