Social Payments or P2P on Steroids

Social Payments or P2P on Steroids

We’ve tested a number of the P2P apps over the past several weeks and believe Venmo has the best-in-class user experience. A software executive warned me many years ago: “Don’t underestimate the power of the GUI” (“GUI”: Graphical User Interface). Venmo’s near frictionless user experience combined with Facebook’s social features give the application a “leg up” on the competition from a user adoption standpoint.

My Mother’s On Venmo.

She was pulled into Venmo’s ecosystem by her small business clients. More than 40 million people use Venmo and more than $21 billion of transaction volume was processed on the platform in Q1, up 73% Y-O-Y. Perhaps the most fascinating Venmo feature is the social element. Venmo makes it easy to find counterparties (the second “P” in a P2P transaction), due to the baked-in Facebook integration. Venmo users may quickly search for friends, family and colleagues by name, username and photo, thus nudging user adoption forward.

Viral Payments

For someone less privacy conscious than myself, Venmo makes it super easy to connect Facebook friends and Contacts to one’s Venmo profile – thus supercharging user adoption. Once you are a Venmo “friend” of another Venmo user, payments may glide back and forth between friends. Square’s “Cash App” lacks Venmo’s Facebook connectivity but enables users to import contact lists.

Now for the fascinating part of Venmo’s social features – public blast notices of whom you paid, when you paid them and what you paid them for. Taking the above example, Anders Lantz paid Olivia Helmer for steak dinner 1 minute ago. I don’t know either party but I know they enjoy steak given that this is public information visible in Venmo’s “Public” tab. This is clearly a generational thing that doesn’t appeal to me in the least. However, Venmo makes it easy enough for me to provision my privacy settings so that I can’t readily be found on Venmo nor are my transactions published across the Interweb. I’m curious as to what percentage of Venmo’s user base is aware that their transactions are public, particularly as it relates to users who skew to the upper end of the age bracket?

A Leg Up on the Competition

I believe Venmo is superior to PayPal’s legacy app – it has less friction, is more intuitive and incorporates the social features described earlier. PayPal owns Venmo, having acquired Braintree in 2013 for approximately $800 million after Braintree had acquired Venmo for approximately $26 million a year earlier. Bill Ready is the common thread through all of this. Ready is the former CFO and Product Head of iPay (acquired by Jack Henry in 2010), former CEO of Braintree and currently COO at PayPal. See the CNBC interview with Bill Ready at article’s end.

Zelle (the P2P app owned by a number of the larger banks) also has some work to do – namely on the on-boarding side. Zelle ought to allow users to on-board by loading a bank card as opposed to requiring users to register by logging on to the bank’s Website via the app – too cumbersome, too many clicks compared to the competition.

Similar Opportunity for Trading Securities, Healthcare and other Applications. Privacy Is Becoming Less of A Barrier to Adoption.

These P2P platforms validate users at registration and work seamlessly as they operate on the principle of universal standards – $1 USD is $1 USD in Boston, New York, Dallas and elsewhere. Payments don’t get bounced because both sides of the transaction recognize the transaction elements. This shares similarities to forthcoming blockchain-based trading platforms where trading counterparties, issuers and other trade elements are “known” to the counterparties, thus allowing for seamless trade execution and settlement. Similarly, this logic could be applied to the healthcare system or any economic system where participants’ identity is required. Historically this was a challenge in part due to privacy rights and consumers’ hesitancy to share personal details or “PII” data. However, as time goes on it appears consumers are less concerned about private details becoming public. Look no further than my knowledge of a stranger’s dietary habits based on her Venmo account.