How does Venmo make money?

By   |   Verified by Andrew Boyd   |   Updated 1st July 2021

How Venmo makes money
  • See how Venmo works.
  • Learn about Venmo’s different revenue streams.
  • Compare Venmo to other payment services.

Are you wondering how Venmo makes money? This digital wallet allows users to transfer money and merchants to accept payment using the official Venmo app.

With Venmo, users can send money to each other or use the service to pay at select merchants in the network, using a dedicated debit card or the "Pay with Venmo" feature. This post looks at how the company makes money from its service offering.

Company overview

Founded in 2009, with headquarters in New York, Venmo targets the millennial market with its services. Braintree acquired the company in 2012 for $26.2 million, with PayPal acquiring Braintree some 12 months later for $800 million.

Currently, Venmo has more than 70 million users, with steady user growth expected in the future. The name Venmo comes from the Latin "vendere," which means "to sell," and "mo," which is a shortening of the word, mobile.

What does Venmo do?

The Venmo app connects to users' checking accounts and debit or credit card facilities, allowing them to complete payment requests when sending or receiving money online.

A Venmo user can request "charges" from friends in their network by adding them to their app, similar to making "friends" on Facebook.

After sending the payment request, the recipient has the chance to accept or deny it through their app on their mobile device. After receiving the funds, the recipient can transfer it to their nominated bank account or linked card, or they can choose to keep it in their e-wallet on the platform.

Users also have the option of writing short notes to the recipient in their payment requests. Venmo also offers an API for businesses to connect their payment services.

How does Venmo work?

Venmo is a "peer-to-peer" mobile payment network allowing users to transfer money between authorized parties or pay for goods and services they purchase through merchant partners. The app also has the useful function of bill splitting, allowing you to split the bill at a restaurant.

To transfer funds through Venmo, both parties must have the app and register with each other's networks. The platform has a similar look to Facebook Messenger, allowing users to message each other, and it also permits the use of emojis.

However, it's important to note that the service is only available to US residents with US bank accounts. Businesses can also sign up with Venmo, allowing them to accept payments for goods and services through the app.

To qualify, merchants adjust their PayPal Checkout configuration, adding Venmo as an additional payment service. Some of Venmo’s merchant partners include Uber, Grubhub, Lulumon, and Poshmark.

Venmo also offers users a debit card connected to their app. With the card, users can utilize their Venmo balance to pay for groceries or products and services, just like they would with a standard debit card.

Users also have the option of receiving paychecks through linked accounts and earning cashback from participating retailers.

How Venmo makes money

Venmo makes money by charging members for using its "Pay with Venmo" feature. Venmo earns a fee from every instant transfer, interchange and withdrawal, and interest on cash. The company also charges fees for cashing checks and on affiliate commissions from its cashback program.

Pay with Venmo

Pay with Venmo is the company's biggest revenue stream. The platform charges a 2.9% merchant fee and a $0.30 transaction fee on every payment request. It's a similar charge to what you get when paying with a Mastercard or Visa.

Instant transfers

Venmo started offering this feature in 2019, and it turned into a huge revenue stream for the company. For users who don’t want to wait 1 to 3 days to transfer their Venmo balance to their bank account, they can make an instant transfer. Venmo charges users a 1% transaction fee, with minimums of $0.25, and a fee cap of $10 on all transactions.

Interchange and withdrawal fees

Venmo charges merchants an interchange fee for processing transactions. When withdrawing from an ATM, users must pay a $2.50 withdrawal fee or incur a $3.00 fee when making withdrawals at bank tellers.

Cash a Check

Venmo launched its check cashing service in January 2021. The company charges users 1% of the transaction cost, with a minimum check amount of $5.

Cashback program

Like most other debit card facilities, Venmo offers users a cashback rewards facility attached to their Venmo card.

Some of the participating merchants in the cashback program include Papa Johns, Chevron, Dunkin' Donuts, Target, and more. Cashback amounts vary from 1% to 2% of the transaction value.

Cash interest

Venmo loans cash in its system to the banks in return for an average lending fee (net interest margin) of 3.35% in 2019.

Future growth engine

PayPal, Venmo's parent company, announced that they would continue to advance the partnerships the company has between retailers.

The company also expects to bring other major merchants like Bed, Bath, & Beyond and Nike into its partner network, allowing for the processing of QR payments.

The company continues to expand, but there is no word on whether it intends to take the Venmo model into the international market.


Some of the e-wallet services competing for market share with Venmo include the following.

  • Google Pay. As the closest e-wallet competitor to Venmo, Google Pay also offers users a setup where they can connect their bank account and credit or debit card to the platform. However, Google Pay has an edge since it's available internationally.
  • Apple Pay. Apple Pay is growing in popularity across the United States and Canada. Like Google Pay, it's available internationally, with strong market development in countries like the UK and Australia. Apple Pay is available for all iOS-based devices, relying on the fingerprint scanner on the device to verify the user's identity for the transaction.
  • Zelle. Zelle is a cash payment app with many similar features to Venmo. However, a group of US-based banking institutions owns and manages the payment app.
  • Cash App. Jack Dorsey, the founder of Twitter, launched Square to make it a payment alternative to PayPal. It utilizes its "Cash App" platform for free debit card transactions through the company's mobile app.