Who Needs Cash When You’ve Got Venmo?

You’re searching through all of your belongings and can’t seem to find your wallet. This sounds like a disaster — an atrocity that could never be mitigated; though, for me, it’s a daily occurrence. Forgetting my wallet happens so frequently that I’ve mastered the ability to function without it. How you ask? The answer is simple- Venmo. Venmo is a new payment application that took the University of Michigan campus by storm and may just be the beginning of the end of cash as we know it. To further explain, I will describe a day in my life, wallet-free.

Dun Nuh Nuh! I wake up from that well known iPhone message sound. The text is from my roommate saying she’s leaving for the supermarket to pick up some groceries for the apartment and asking if I need anything. I really do need more eggs and yogurt but I don’t have any cash on me and the task of making my way out of bed and to an ATM seems a little auspicious this early in the morning. It is at that moment that I remember Venmo. Rather than going to the ATM to get cash to reimburse my roommate, I simply tell her that I’ll Venmo her back. I log onto my Venmo app and send the money directly back to her. Transaction complete. Later that day, I meet one of the students I tutor for an “Introduction to Statistics” class. At the end of the session, rather than paying in cash, the student asks, “Do you take Venmo?” Following the tutoring session, I remember that it is my best friend’s 21st birthday; did I mention she is studying in Florence for the semester. I send a text to another one of my friends, who is also studying in Florence, and ask her to pick up a bottle of champagne to give to my friend from me. I just Venmo her the amount of the bottle and I easily was able to give my friend a birthday gift. Now it’s nighttime. We call an Uber and since, when the cost is split it comes to 25 cents per person, I tell my friends that I’ll call the Uber and they can just Venmo me their portion, to save us each the change. Transaction complete. Now I am at the bar and my friends and I order a round of drinks. Rather than everyone scrambling to gather cash to pay the bartender, one person puts the total amount on their card, and instantly the money is returned back to them through Venmo. No matter the distance, time, or reason, I can easily complete a money transaction with Venmo.

Currently, in order to function for a full day wallet-free, one person must be willing to pay, or everyone must have the app. But, this is just the start; who knows where Venmo can go from here. The possibilities are limitless and I, for one, envision a world not so far off that will be completely cash free. But in the meantime, I will discuss why Venmo has become a widely used application on college campuses and how it has paved the way for how effective mobile payments can be.

Simple is key

An idea that stemmed from a forgotten wallet transpired into an idea that made the concept of a mobile wallet widely accepted amongst Millennials. The process of either lending or borrowing money has always been a burden, until Venmo took my campus by storm. As a college student cash is constantly being spent on life’s necessities: cabs to the bar, drinks at the bar, pizza after the bar, and obviously, other reasons such as rent and groceries. Many of these instances involve exchanging money amongst friends and often leads to someone owing someone else money. Before Venmo, I used to have to track people down to collect money I was owed and physically had to be in the same place as them to do so. Often, this process results in either not getting the money back for a while or just not getting it back at all. This is inevitable because remembering to give someone money isn’t always at the top of your radar when you’re juggling time between classes and exams.

That’s where Venmo materializes. Venmo conquered the issue of time and space, just like technology typically does. All you have to do is type in the persons name who you either want to pay or charge money for, type in the amount, add a caption for what the payment or charge is for, tap the “Send” button, and the transaction is instant. This removes the barrier of having to physically be with the person to either give or receive money. Rather than hunting friends down to alert them to how much money they owe and then waiting for them to get cash from the ATM or worse, figure out how to make change, the Venmo process has made it all seamless and simple. At the end of the day, that’s what people want. They want their life to be simplified and Venmo appears to be the answer.

How did the phenomenon begin?

It seems like it just happened overnight where everyone I knew on campus started saying “Oh just Venmo me”. You know something is really making an impact when their brand becomes a common verb that is often exchanged. It became so widely adopted and so normal for people to use this money exchanging app rather than exchanging the physical bills. The phenomenon piqued my interest.. How did the norm of Venmo spread across University students? To my knowledge, it’s not like I have ever seen any advertisements for Venmo or been solicited in any kind of way. After conducting campus interviews, I realized that I am not alone in my wonderment. The spread of Venmo is a prime example of the Diffusion of Innovation, which is “the information exchange through which one individual communicates a new idea to one or several others.” Word of mouth advertisement did wonders for this company. An interview with Andrew Kortina — one of Venmo’s founders — confirmed my assessment by stating, “Chase is running ads during the Super Bowl for their mobile payment app. We don’t have that kind of marketing budget, so we rely on our users to spread the word about Venmo.” Their low budget marketing plan seems to be working because that is how all my friends, as well as the different people I interviewed, began using it.

The Diffusion of Innovation states, “when someone like ourselves tells us of their positive evaluation of a new idea, we are often motivated to adopt it”. Sarah, a sophomore at the University of Michigan, discussed that she started Venmo because “all my friends were using it so I started to use it.” When asked how she heard about it, her obvious answer was,“I heard about it from my friends.” Daniel, a senior at the University of Michigan, also discussed that he started to use Venmo because “his roommate told him about it and that he needed to download it”. The repetitive answers amongst all people I spoke to kept flowing. Even when asked why Venmo as opposed to other payment applications such as Square and PayPal, the simple answer of “all my friends use Venmo so I use Venmo” was a common occurrence. Josh, a sophomore student here, gave interesting insight by saying, “I started using it because most of my friends had it and it basically became a burden not to have it.” I concur with this assertion.

Prior to the mass adoption of Venmo, it was inconvenient when someone didn’t have it, because it was expected that everyone did. When all your friends are splitting something, such as a cable bill, you don’t want to be the one person who imposes a burden on everyone else. Therefore, the diffusion of innovation continues to spread. For something to spread, it must initiate a positive experience. “When felt needs are met, a faster rate of adoption usually occurs.” Venmo having been continually spread through word of mouth signifies that it’s design and purpose are adequate for the application to continue being referred and downloaded by new users. This now poses the question, “What features of Venmo are valuable enough to cause users to completely neglect privacy concerns and adopt it?”

Convenience > Privacy

With an application that is hooked up to your bank account, privacy should be of significant concern before downloading it, right? Well, not so much. I can attest that when my friends first introduced me to Venmo, the concern for giving a mobile application access to my bank account was very minimal in comparison to how excited I was to have the convenience of sending money to friends with just a click of a button. I figured that if my friends were all using it, it must be safe. Once again, I am not alone on this.

When asked if she completed any background research on Venmo before using it, Rebecca admitted, “I just trusted my friend for recommending it and then just started using it.” Similarly, Daniel discussed that before he started using it, he didn’t do any background research, he just asked his friend a lot of questions about it first, to make sure it was okay. Even though he didn’t just download it like the rest of the people did, Daniel still relied on his friend to tell him that the application was safe and okay to use rather than looking up Venmo’s security protocol for himself.

After exploring this idea further, two different explanations emerged for why people just started using an application that can pose many privacy concerns, without conducting any prior research. The first idea references back to the Diffusion of Innovation. According to this theory, “most people depend mainly upon a subjective evaluation of an innovation that is conveyed to them from other individuals like themselves who have previously adopted the innovation.” This idea exemplifies exactly what seems to be occurring here. Considering people have had positive experiences with the app which caused them to recommend it to friends, the recommendation alone suggests to the new user that this application must be safe and okay to use. Rather than turning to sources and examining Venmo’s security mechanisms to understand how and why it is safe, a simple referral from a friend seems to be all the confirmation one needs. This got me thinking; there has to be something else at play that is causing all of these downloads.

According to The Pew Research Center, “individuals are willing to give up privacy for the reasons of ease, fastness, and convenience.” After hearing all of the different responses to the question, “What benefits does Venmo provide you?,” it became clear that this aspect definitely has to be a contributing factor. All the responses to this question were extremely interesting since the answers vary but contain the same general idea, a list of different responses is provided below.

· I don’t have to worry as much about having cash on me when I go out. If I need cash for when I get to the bar and for a cab or if someone gets me a drink, I can easily give them back the money. It’s just so easy- Rachel, sophomore

· Simplicity of payment. You just type it in the app and the money is just there whenever cash is needed. It so fast and done with simple click of a button- Daniel, senior

· It is easier when you don’t want to use cash to just use it and you know you will get the money back and you don’t have to have cash on you- Lauren, junior

· I do not like to carry cash that often so helps me not carry cash- Max, freshman

· It gives me an ease of paying my friends without having cash, which is something I do on a daily basis. — Rebecca, sophomore

· You don’t need to have cash and if you do not have cash someone can use their cash and you can Venmo them- its like having a credit card without actual credit cards its almost like a wallet- Josh, sophomore

As you can see based on all these different responses, Venmo clearly provides ease, fastness and convenience to those who use it, and thus outweighs the privacy risks in their minds. These positive assessments of using Venmo touch on a much bigger idea than simply being reasons for why users feel its okay give up their privacy. All of these answers reveal that Venmo is having such a fast and effective adoption rate because people hate carrying cash.

What the future may hold

Could Venmo be paving the way for the end of cash as we know it? In the manner it is being used right now, I think so. As previously displayed, the main benefit that users gain from Venmo is that that it rids them from having to exchange physical cash. The convenience of having a mobile wallet seamlessly complete all these “cash” transactions for you is a clear attraction and really making an impact in this mobile world. Venmo is essentially making each user their own personal “mini bank” rather than having to actually go to the bank. Since one can either deposit money right into their bank account from the application or just leave the money in their Venmo account so it can easily be passed to and from friends, it decreases the need of having to constantly withdraw cash from the bank or ATM. It also reduces costs because there are no transaction fees unless you are using a credit card. All of the students interviewed realized that they have been withdrawing cash less often now that they have been using Venmo.

Considering Millennials are the ones who are really emerged in this technology age, I am not surprised that we would be the age group that is paving the way for this. It isn’t that we are naïve and put too much trust in technology (well, kind of), it’s that we are so accustomed to trusting technology that something like this doesn’t phase us as it does our elders because we know it will work and make our lives easier. So, if anyone is going to break this barrier and prove how effective a mobile wallet can be, Venmo is targeting the right age group.

The appeal of not having to carry cash around and using this application instead is so telling for what the future may hold. When I asked students what type of “purchases” they use Venmo for, their answers consisted of paying a friend back for rent, cable, drinks at the bar, groceries, splitting a bill at a restaurant, and alcohol purchases. However, all these answers consisted of ways that they split things amongst their friends. Someone still has to volunteer to be the one that uses their card or cash to initiate the transaction. If it can be that easy to pay a friend through Venmo, why can’t I pay the merchant through it? For example, why is it not possible to Venmo the restaurant for your portion of the bill? That is what I believe the future holds. Apple Pay has already ventured into this area by being allowing consumers to pay participating merchants with just the tap of a phone. However, this is only available to those who own an iPhone 6. Therefore, it really limits its target population. What this displays is that this notion of paying actual merchants isn’t such a far-fetched idea. Venmo has proven how effective they are with transferring money amongst friends so it’s exciting to see what the future holds for this company. Since it is evident that consumers value a cash free world, the technology will eventually be built to cater those needs. This may just be the start of the end of cash as we know it.