“Be careful what you wish for – you just might get it.”
A 10-year PayPal vet, most recently in the role of senior vice president of credit, Esch told PYMNTS CEO Karen Webster that he was once asked years earlier if there was any other job at the company that he’d like to have. The answer was no since he was a dyed-in-the-wool credit guy and loved what he was doing — but if there was ever a chance to run Venmo, that might get his attention.
A few months ago, he stepped into that role — just in time for a global pandemic that turned the entire world upside down, with consumers and merchants doing crash conversions to digital as physical commerce more or less shut down worldwide. But as usage patterns shifted dramatically, something was equally visible on the Venmo platform.
“Most of the time, [before COVID-19], Venmo was tied to something consumers did together — ‘we’ve ordered a pizza [or] we went to a show’ — and they were paying each other back,” Esch told Webster. “With the pandemic, that kind of stuff came to a screeching halt. But internally, we’ve seen that the sense of community [is] surging and people are using Venmo to help other people.”
Esch noted that consumers are putting up funds to purchase groceries for front-line workers, or tipping their hairdressers or bartenders to keep them afloat even though they can’t provide services right now. Some are also paying musicians to host virtual gigs on Zoom calls or sending money to members of their social circle who have lost their jobs and fallen on hard times.
As Venmo considers what’s next in terms of developing the business, Esch said the platform represents a social community as much as “app-powered money.” Starting from that premise, the company has developed three fundamental goals: to continue growing the company’s peer-to-peer (P2P) user base, to increase Venmo’s utility for users’ day-to-day applications and to expand to include businesses.
Esch said Venmo is already well on its way to fulfilling those goals and will announce some very interesting things soon. If his team delivers as expected, he added, that will do more than just help Venmo grow and scale.
Coming Soon: The Fourth Leg Of A Credit Card Value Proposition
P2P is Venmo’s foundational product, so it remains Esch’s priority to build on and enhance what’s already bringing in tens of millions of customers.
As he told Webster, the unit has already begun that process by adding things like direct deposit to the platform. Venmo plans to add even more financial services utilities to the platform through new offerings like a branded credit card product, which is scheduled for later this year.
Although Esch hesitated to share details of the offering, he did tell Webster that the goal is to expand three essential value propositions of the card world: line size, price and rewards. He said that Venmo also hopes to address a fourth consideration: “experience of the interaction.”
“I think when it’s introduced, it will be the fourth leg of a credit card value proposition,” Esch said. “And while I think we’re doing some interesting things on those other legs as well, on the experience side, I think we’re going to push out some things that haven’t been seen anywhere before.”
Those initiatives will make Venmo more useful for some segments of the community, although not all, Esch noted. Venmo members tend to skew a bit younger and more affluent than average, and many are well-banked and don’t need a card product or direct deposit. But even for such customers, Esch said, Venmo can expand its usefulness by growing the community to include more businesses — particularly local ones.
Bringing Businesses Into The Venmo Community
Esch said that most people could easily differentiate between “the retailers or businesses they think of as part of [their] community,” and those nearby enterprises that people only transaction with incidentally.
Firms that consumers make a personal connection with — the corner pub, the local boutique, dog walkers and others — are ideally suited for the kind of transaction-inclusive social community that Venmo strives to be.
“I think as we move into the business world, we’re going to see that sense of community play out,” Esch predicted. “During this pandemic, our customers have demonstrated with their actions and with their money transfers that they care about and are invested in other members of the community.”
The ability to add businesses to that community should move Venmo from a platform for P2P payments to one for P2B payments over the next few years. And doing so could answer the question that PayPal is often asked about Venmo: “When are you going to monetize it?”
Webster joked that in his new role as Venmo’s chief, he can now take over from PayPal President and CEO Dan Schulman in answering that question. Esch laughed but noted that as Venmo contemplates making its community larger and more inclusive of businesses, the path to monetization should become more clear.
“Ultimately, we drive monetization through expansion of the community,” he said. “Historically, the community for Venmo has been consumer-side. The migration here is that [it needs] to include business. We’re only in the very first stage of a very controlled build-out — but over the next several years, I think that’s where the monetization will be.”
Because at the end of the day, community is what truly sets Venmo apart. PayPal is massive, Esch noted — its reach spreads to every corner of the globe. When he uses his PayPal wallet to pay, the odds are good that whatever he ordered took a journey of at least several hundred miles to get to him.
“When I pay with Venmo, 90 percent of the volume is with people who are in probably a 10-mile radius of me,” he said. “There is a local and a social nature to Venmo that is completely unique to it.”