Venmo, PayPal’s mobile payment service, will finally offer an instant money transfer feature that will allow transfer transactions directly to any US bank account.
Venmo is a mobile-based platform that allows users to accomplish cash transfers through their PayPal accounts. In essence, it as a digital wallet for quick and easy transactions between friends and family over “splitting the bill, taxi fare, and much more.”
Since Venmo launched in 2009, it attracted quite a consumer base of its own, particularly people who rely on the simplicity and ease of bankless transactions for quick over-the-air transactions.
Ten years down the line, Venmo has a whopping 40 million registered and active accounts, making the digital wallet a leader compared to other banks in the U.S. And, based on the company’s performance, the number is expected to continue climbing.
Relevantly, Venmo was able to handle a payment volume of around $24 billion in this year’s second quarter, making it one of the largest peer-to-peer payment apps in the U.S.
But other than PayPal to PayPal account transfers, Venmo offers a free to use standard bank transfer option, which takes between one and three business days to accomplish.
As an alternative to the standard bank transfer, Venmo users also have an option to choose instant transfers that can be accomplished within minutes — but was mainly restricted to eligible VISA and Master Card debit accounts — which was the case until this announcement.
Initially, PayPal wanted to introduce debit card transfers to its users to offer the same quick and reliable transactions. Specifically, for user accounts where their payments are directly deducted from their debit accounts, such as monthly dues like bills and rent.
Furthermore, it would also allow Venmo clients to have a bridge to having or withdrawing physical cash into their actual wallets. Bank transfers can also help small business customers or gig economy workers.
When the feature launched in January 2018, Venmo’s Instant Transfer option incurred a small fee of $0.25 from every cash transfer, but Venmo bumped it up to 1% of the transferred amount last October.
Today, Venmo is extending the Instant Transfer service to all US-eligible bank accounts. According to the company, the option will have the same fees. Now, the minimum fee is $0.25, and the maximum fee is $10.
Furthermore, the same service towards all U.S. bank account transfers will also be available for Venmo’s standard free bank transfer option, which users can choose if they don’t want to pay for recurring fees and opt not to pay for the convenience of instant payments.
Reportedly, the new feature should also help Venmo stay in close competition with other mobile-based cash transfer platforms such as Square’s Cash App and bank-operated challenger Zelle, who reported $44 billion sent on 171 million transactions in the second quarter of 2019.
Introducing the same service as Zelle, Venmo should be able to increase the number of users in its own platform and, eventually, its profit margins, which is comparatively in a significantly wide difference against Zelle.
This should be available in the “coming weeks,” Venmo says as the service is currently being rolled out to customers but free bank transfers are still available if you’re willing to wait for the standard service, which takes one to three business days.
Though the instant transfer can happen within minutes, the company warns that transactions will also depend on the user’s bank and may take up to half an hour.
For now, Venmo users should make sure their app is up-to-date in order to get the new option. Also, in order to use the service, users need to download the iOS or Android app, sign up to create an account, verify a phone number and email address, then verify a bank account.
In other news, Venmo will not be entering a market where cash transfer platforms are making it far more convenient for clients to move their money around.
In a report, Visa Direct, the company’s instant push payment, experienced 100 percent year over year transaction growth. Meanwhile, there’s also Mastercard Send, which focuses on helping gig and hourly workers have access to their earned wages instantly.
The Federal Reserve announced last week that it would develop an instant payment platform called FedNow that would compete with the privately-owned The Clearing House on real-time payments.