Venmo, a mobile person-to-person payment system now owned by PayPal, rocketed in popularity with millennials by treating money movement as a type of social interaction.
Venmo users send money with messages like, "Love you like a chocolate covered strawberry," as well as less poetic descriptions like "Rent" and "Saturday night." Others use emoji (also called emoticons or "smileys") to communicate a message, such as pictures of a swimsuit and the ocean to depict a day at the beach.
This is the language of the Internet, and at a time when many companies were struggling to shoehorn payment systems into social media like Twitter, Venmo succeeded by creating a Twitter-like interface for a standalone payment app. When a group of young adults meet up, they treat the company's name like a verb "just Venmo me," they might say when splitting a dinner check.
PayPal came to own Venmo through its $800 million acquisition of Braintree last year, but part of Venmo's success is due to its lacking the emotional baggage many people associate with PayPal.
Dan Garfield, a 29-year-old developer at the real estate startup Nestio, avoids PayPal in part because of his "political beef" with the company's 2010 decision to stop permitting donations to WikiLeaks. He also had a bad experience about six years ago when requesting a refund through PayPal after receiving the wrong item from an eBay seller (PayPal is a unit of eBay).
By comparison, Venmo looked like a better option. For the stuff Im using it for, which is generally sending small payments to a person I know in real life, it's extremely good at that, very convenient," he said. "It's reasonably popular with people I know.
Venmo has a strong network effect. Mike O'Toole, Nestio's 30-year-old co-founder, started using it after a "cool tech person" mentioned the app at Tech Stars, a 13-week startup accelerator that Nestio participated in three years ago.
"The social component for millennials and college-aged students is pretty cool and adds an exciting layer over a traditionally boring task," said Jordan McKee, senior analyst with 451 Payments.
McKee was originally skeptical that social media and payments could work together, but after downloading Venmo he became enthralled with the social feed, finding many messages humorous and trying to figure out what each string of emoji could stand for.
While P2P companies continue to give the example of splitting a check with friends at a restaurant, McKee thinks Venmo is being used more often to pay bills, such as roommates splitting rent and utilities. (This is why Garfield started using the app about six months ago. He moved into a new apartment and needed to split bills and groceries with his roommate.)
Part of Venmo's appeal is its lack off fees. Today, PayPal "is using Venmo to grow the number of cards they have on file," McKee said. "They might not ever charge" because Venmo acts as an onboarding tool for Braintree's ecommerce payment service.
PayPal could transition the Venmo brand away over time, but it's unlikely to happen since PayPal would not want to include Venmo's social aspects into its own app, said Rick Oglesby, an analyst at Double Diamond Group in Colorado.
"While social sharing may be cool for Venmo customers, PayPal has lots of pre-Venmo customers who would want nothing to do with that, and who want a greater degree of privacy," he said. "There is value in allowing the Venmo customer to share; there is also value in allowing the PayPal customer to keep his/her distance from that, knowing that their payment information will never be shared."
Other companies are trying new approaches to P2P payments. Last year, Google made P2P payments a part of its Gmail service, which now allows people to send funds as though they were sending attachments over email. And Square recently redesigned Square Cash, its own P2P service, to allow users to set a profile picture and access their phone's contact list.