Venmo Payment App Launches a Credit Card via Synchrony Financial

Venmo, the mobile payment app popular among millennials, launched its first credit card at the beginning of October. The initial launch will make the credit card available only to select existing users. Availability will expand to a broader user base in the coming months. The company hopes that directly integrating the card into the mobile app the design will appeal to the younger user base. The card is issued by Synchrony Financial, the Connecticut-based consumer financial services company that is also behind the store cards for Amazon, Lowe’s, eBay, Gap and numerous other brands.

The Venmo cards will have a unique QR code on the front that is easily scannable. It will also have RFID chip technology embedded in the cards for contactless tap-to-pay transactions. In order to appeal to millennial users, the new credit cards will come in a number of colorful, patterned designs. There will not be an annual fee or foreign transaction fee.

Venmo Founded in 2009

Founded in 2009, Venmo has more than 60 million active accounts. It handled $37 billion in transactions in its most recent quarter. Venmo was acquired by PayPal in 2013 as part of PayPal’s $800 million purchase of the startup Braintree. Just a year earlier in 2012, Braintree had had acquired the company $26.2 million. Because of the fintech boom caused by the pandemic, PayPal is now worth more than every U.S. bank except JPMorgan Chase. It is also worth more than Fortune 500 companies such as Walt Disney Co. and Netflix. With the backing of PayPal, Venmo has become a leading online peer-to-peer money transfer platform.

Venmo already offers a Mastercard debit card, which is linked to users’ Venmo accounts and enables them to spend their Venmo balance funds both in stores and online. Sunchrony Financial is the issuer of the card pursuant to a license from Visa. Similar to the debit card, users will be able to use their Venmo balance to pay off the credit card. The app can coordinate spending activity and rewards.

The rewards program allows users to earn up to 3% cash back. This cash back model is similar to a number of other popular credit cards. For example, Amazon’s Prime Rewards credit card offers customers up to 5% cash back on and Whole Foods purchases. Other spending categories reward users with 2% such as restaurant spending, and 1% cash back on all remaining transactions.

New Card Will Automate Cash Rebates

There is a key distinction in Venmo’s model that sets it apart from other credit cards based on cash rebate incentives. Unlike other cards, Venmo is allowing its cash back reward system to be controlled by a particular user’s spending habits. Venmo sorts a user’s purchases into predefined categories such as health and beauty, grocery, gas, transportation, and dining. It then gives 3% cash back on a given user’s highest spending category, 2% for the second highest spending category, and 1% for everything else.

PayPal installed Darrell Esch as the general manager of Venmo in the summer of 2020. This was just as the impact of the pandemic was amplifying and with it the demand for mobile money transmission services. Darrell Esch replaced the former general manager, Amit Jhawar, who joined a Salt Lake City-based global payments startup called Galileo. Prior to his appointment as general manager, Esch worked in various roles at PayPal. Ultimately, he was senior vice president of credit.

Esch noticed that the onset of the pandemic created new types of uses of the app. For example, people were sending money to musicians, waiters, and other service workers to keep them financially afloat. He also noticed Venmo needed to expand and innovative its digital offerings to keep to the prolonged pandemic conditions. The launch of the Venmo card is designed to seamlessly work with Venmo’s existing mobile app features and also creates new complementary functionalities.

Venmo Card to Offer Split Payment Function

One perk of the Venmo credit card is the split payment function. This function will be built into the design of the physical card itself. Similar to using Venmo to split costs for shared social experiences, the physical card will allow customers to split the check. For example, one person at a restaurant can charge the entire group meal balance to their Venmo card. Friends can pass the physical card around the table. Each friend can scan the QR code on the front of the card to pay their share with their smartphones.

Social Networking Component Critical

Competitors, such as Zelle, Square’s Cash App, and Stripe also facilitate seamless mobile money transfers. However, Venmo’s distinguishing feature is its social networking component. By default, peer-to-peer Venmo publicly publishes transactions, although the amount is not listed. This could theoretically allow someone to trace the spending habits of certain people or their whereabouts on a particular date. Although users can tighten their privacy settings, this component has led to privacy concerns. Despite this, Venmo has continues to remain highly popular and the launch of the Venmo credit card is a compelling business opportunity for the company.

Venmo image credit: Engadget.