Venmo. The wallet of the future.

Although nothing feels better than a stack of cold hard cash, we live in the age of digital transactions. According to the Federal Reserve Bank of San Fransisco, Cash was used in only 32 percent of consumer transactions in 2015. Paying with a credit or debit card is easy and preferred by most consumers. But what if we want to pay a friend with money that’s stuck in a bank account? Paying a friend has recently become possible with most banking apps as long as both you and your friend use the same bank. The demand for transferring money has increased significantly considering society has made digital payment routine.

In December of 1998 Confinity Incorporated was founded by Max Levchin, Ken Howery, Luke Nosek, and Peter Thiel. They found there footing in the market when they initially started as Palm Pilot payments and cryptography company. Palm Pilot developed personal digital assistants in 1997. Personal digital assistants were handheld personal computers. The Palm pilot was not the first personal digital assistant to hit the market, nor was it the first personal digital assistant made by palm. However the palm pilot was the first personal digital assistant to be sold world wide. The palm pilot paved the way for future personal digital assistants and similar smartphone gadgets.

Confinity launched Paypal in 1999. Paypal is where Peer to Peer payments originated. Peer to Peer is the term that describes bank transfers from person to person. Peer to Peer payments are easy paperless electronic money transfers. Business and engineering innovator Elon Musk saw the potential of Peer to Peer payments. Elon Musk’s online banking company, merged with confinity in March of 2000. Musk knew there was a bright future to peer to peer payment despite the disagreement of president Bill Harris. Musk pursued his Paypal endeavors, Harris was so doubtful of Musk’s decision that he left the company in May of 2000. Musk was certain that Paypal would be his most lucrative business decision. So much so that he decided to put all his recourses into Paypal and terminate all of’s other internet banking operations. In accordance with Musk’s plan to focus on Paypal, was renamed Paypal in 2001. Paypal expended tremendously in the following year and introduced their Initial public offering in 2002 at $13 per a share.

With smartphone technology on the rise Peer to Peer payments became easier and more accessible. People were able to transfer money between Paypal accounts within seconds. Peer to Peer payments have become a norm. Paying a freind on Venmo is easy and casual.

Venmo, a similar mobile payment service was founded in 2009 by Andrew Kortina and Irqam Magdon-Ismail. The name came from the Latin word “vendere” which means “to sell” and “mo” meaning mobile. “picking a name wasn’t a huge deal for the fledgling company. They just wanted something that was short, could be used as a verb, could be spelled intuitively, and could be purchased on GoDaddy for cheap”. Magdon-Ismail and Kortina met as freshman roommates at the University of Pennsylvania. The idea came to them when Magdon-Ismail went to New York City to visit Kortina for the weekend and forgot his wallet. Kortina being the good friend that he is, covered Magdon-Ismail’s expenses for the weekend. When Magdon-Ismail was trying to pay back Kortina by mailing a check, they realized there must be a more streamline way to pay a friend.

This is where the idea for Venmo came to life. Venmo was first designed as a text message based Peer to Peer payment platform. Kortina and Magdon-Ismail sent each other the first text message payments. They needed to make Venmo into an app to harness it’s full potential. When developing the app they noticed the information from their texts can be used as a social media platform as well as a payment service. When they developed the app, they included a message to go with each payment. The messages would be displayed in Venmo for all your contacts to see. This informed people of more than just who was paying who. The message allows you to explain what the payment is for and possibly where you were. For example, Magdon-Ismail could have paid back Kortina and included a message along the lines of, “Forgot my wallet, Thanks for covering me during our weekend in New York City”. This would be visible in the feed of anyone who has either Magdon-Ismail or Kortina in their contacts. It gives their friends insight to social dynamic and what’s going on in their lives. Venmo is currently one of the most popular Peer to Peer services.

Venmo is unlike any other payment service because it combines a social platform with payments. It’s fun and entertaining for both you and your contacts to receive a massage with your payment. People pay attention to their Venmo feed for this reason. The ability to include a social aspect gives Venmo an advantage in the Peer to peer payment market. The term Venmo as a verb has became widely acknowledged in recent years. Whenever someone owes me money I personally prefer the money in my bank account so I simply say “Venmo me”. One New York Time’s article suggests that Venmo exposes friends who are cheap by allowing users to hold friends accountable for the exact amount owed down to the penny.

Venmo does not generate a significant amount of revenue for Paypal. Banks earn revenue by investing customers money. Venmo is not like any bank, Venmo does not invest user funds. Venmo makes the majority of it’s profits from partnerships. Venmo has partnered with over a dozen apps. The apps integrate Venmo by letting users pay with funds directly from their Venmo. In exchange Venmo takes a 2.9 percent cut. This more than what most merchants pay in credit card fees. There are multiple advantages to using Venmo in customer transactions. Many people prefer the streamline efficiency of Venmo. Companies also benefit by having the transaction appear in the feed of all the contacts of the customer. This gives the company free advertising and gives a direct source of credibility especially if there is a positive message to go with the payment. This gives the company publicity without customers having to go out of their way to like them on Facebook or follow them on twitter. The social aspect is all included in the transaction. Companies can learn consumer behavior as well. “Venmo users are more likely to purchase at a new business that they learn about from friends on Venmo.”

Venmo is unlike any banking app in many ways. The most notable being banks would never disclose information about who’s paying who. Venmo was a huge breakthrough in the sense that it went against the norms of all banking apps. Venmo was the first app that allowed users to add any credit or debit card to their account and use it to pay and receive Peer to Peer payments using only a handle. Anyone who has a credit or debit card can easily install and setup Venmo, It’s easy. Try it out! College is expensive so I will be accepting donations paid to @Tyler-Elgar.