Will Venmo + Plastic = Profits?
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What is the main topic discussed in this episode?
With your Money Briefing, I'm Charlie Turner in New York for The Wall Street Journal. Mobile payments app Venmo is going old school to try to turn a profit. We'll have more in just a moment. First, here are some money headlines. Consumer-focused tech companies like Snap, Pinterest and Lyft may have more cachet, but The Wall Street Journal says tech startups that cater to businesses are really hot with investors. For starters, Zoom Video, which makes video conferencing software for companies, solidly outperformed online pinboard Pinterest when the two went public this week. And according to an analysis of Dealogic data by the journal, shares of business software companies that have gone public since 2016 have performed much better than consumer tech companies going public over the same time period.
The reason for this, according to the Journal, is that consumer tech companies are dominated by players like Apple, Amazon and Facebook, which are better at fending off upstart rivals. The existing players in business technology, including Microsoft, IBM and Oracle, have less of a stranglehold on their markets. And check out the Wall Street Journal's Heard on the Street column on golf by Lauren Silva Laughlin. Tiger Woods' fifth Masters title was met with hopes his comeback would revive the sport and help boost shares of companies like Callaway Golf and Titleist owner Acushnet Holdings. But golf has problems that not even Tiger Woods can help overcome.
What is Venmo planning with a new branded credit card and why does it matter?
In fact, the 43-year-old Woods may be part of the problem, and that's one of age demographics. The average Professional Golfers Association watcher in 2016 was 65 years old, much older than for other sports. Another problem is that younger generations aren't playing golf, so fewer people are interested. One study found that the number of golfers aged 18 to 44 fell by about one-third in the 10 years to 2015. That's led to hundreds of golf courses closing over the same period. Still ahead, Venmo is near a deal to offer a branded credit card.
Like many relatively new tech companies, Venmo is popular but not profitable. So the digital payments company is going old school with a plan in the works to offer a Venmo-branded credit card. Venmo is not the first company to explore the option of a credit card alliance. Joining us with more on this is Wall Street Journal reporter Peter Rudiger. Peter, for those who don't use Venmo, it's a money transfer smartphone app. Which company is it close to partnering with for the Venmo card?
How widespread is Venmo usage and who are its core users?
Right. So Venmo is a money transfer app. It's owned by PayPal, which a lot of users might have heard of. But if you're not one of the kind of young millennials that Venmo covets, you might not know that it's pretty popular.
Why is Venmo losing money on peer-to-peer transfers?
Its brand name is used as a verb for sending someone money, just Venmo me. And it is close to reaching a deal with Synchrony Financial, which is a credit card issuer, to issue its own Venmo credit card. Okay. As we've both mentioned, Venmo has been widely adopted.
What revenue experiments has Venmo already tried before the credit-card move?
How many people use the app approximately at this point? So PayPal doesn't disclose that, but the best estimates we have from outside researchers are about 27 million people use Venmo, and they'll make a Venmo payment this year.
Right. And that's a lot of... people using the app, I assume using it a lot of times.
Why is it losing money? So most of the time Venmo doesn't charge you to use it. It's a free service.
How could a Venmo-branded credit card generate profits for the company?
I can send you money and they won't charge me a fee as long as I connect my Venmo account to my bank account or a debit card. But it costs money to actually move that money for PayPal. So it loses money on each one of those transactions and it loses quite a bit of money. So there's analyst estimates out there that just that part of the business, the money transfer business, will lose Venmo about $400 million this year. Well, has it tried other ways to raise money in advance of this credit card partnership announcement? It has. So the credit card announcement is the latest in a series of revenue-generating moves that Venmo has made.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:06–1:26
2
What is Venmo planning with a new branded credit card and why does it matter?
1:26–2:36
3
How widespread is Venmo usage and who are its core users?
2:36–2:48
4
Why is Venmo losing money on peer-to-peer transfers?
2:48–3:02
5
What revenue experiments has Venmo already tried before the credit-card move?
3:02–3:25
6
How could a Venmo-branded credit card generate profits for the company?
3:25–3:56
7
What is the expected timeline and competitive context for Venmo’s credit-card rollout?
3:56–5:49
Speakers
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