The race to the top of the mobile P2P payments market is on. In fact, global research firm Ovum projects that the value of mobile P2P transfers will reach $270.93 billion worldwide in 2019. According to Ken Research, P2P transfers will emerge as one of the two fastest growing segments of U.S. fintech between now and 2020.
“We are entering a shake-out year for mobile P2P payments as many powerful entities both within and outside the banking industry scramble for market share,” said Tom Brennan, Senior Product Manager for CO-OP Financial Services. “And one of the fastest growing technologies within this space is the social payment – especially among millennials.”
Research by First Annapolis finds that mobile payment adoption is, in fact, highest among millennials today, with 82 percent of survey respondents under the age of 35 reporting that they had made a mobile payment – and 37 percent reporting that they had made a P2P transfer.
Consider also that, according to Let’s Talk Payments, millennials are expected to spend more than $60 billion on consumer packaged goods in the next decade – with a demand for mobile, social and personalized experiences when shopping.
“The market opportunity for mobile P2P technology is enormous,” said Brennan. “While credit unions are strengthening their presence in this space, they need to recognize that many younger consumers are already embracing the mobile P2P apps of non-financial companies – and that these apps are shaping their expectations.”
Venmo’s Meteoric Rise
According to PayPal’s third quarter 2016 financial results, there are 382 million Braintree cards on file for the company’s Venmo social P2P payment app, an increase of 107 percent year over year. And Venmo payment volume reached $4.9 billion during the third quarter, representing a 131 percent annual increase.
So what exactly makes Venmo so appealing to millennials and other users?
“Venmo transfers money with all the speedy, seamless utility users have come to expect from mobile, and with a very engaging twist,” said Brennan. “Venmo’s unique value proposition comes from its Facebook-like messaging feed that allows users to view, like and comment on when, where, why – and to whom – their friends are sending money.”
The Art of Paying Socially
He adds that many users interact with Venmo in much the same way they interact with other social media sites.
“We have found that Venmo users view the platform as one more way to connect with friends and keep up with what they are doing,” he said. “And, as with Facebook, the funnier and more creative they can be with their payment ‘descriptions,’ the more likes, comments and general attention they get from their Venmo friends.”
Brennan notes that, unlike many older consumers, Venmo’s largely millennial user base appears to have few qualms about the de-privatization of these financial transactions.
“Venmo provides users with an option to keep payments private when that is their preference,” he said. “And while the app can certainly be used to purchase goods and services – an application that PayPal is advancing – it is simply a home run in the world of social media.”
Which is why, Brennan says, PayPal maintains an entirely separate payment application for the business community – called PayPal.
“What the company’s visionaries have done here is recognize that there is more than one use case for P2P transfers, and that offering – and monetizing – two distinct platforms makes great business sense,” he said, adding that the consumer data collected across Venmo’s messaging feeds is clearly among its most valuable assets.
“Using data analytics, machine learning and advanced marketing algorithms, PayPal is leveraging Venmo messaging content to help its sponsors create more relevant and personalized advertisements,” said Brennan. “Technologically, this is easier said than done because so much of this content is built around emojis, texting abbreviations and other forms of millennial shorthand.”
He continued, “What is fascinating about all of this is that Venmo has been so wildly successful in the mobile payments market even though its transactions take some time to process. As an industry, credit unions and other financial institutions have been operating under the belief that this market is categorically driving us toward real-time payments. While offering real-time P2P payments should take priority on every credit union’s product roadmap, remember that it is always the user experience that counts the most. Venmo doesn’t do anything in real time, and yet its users are very happy with the outcome.”