Paypal (NASDAQ: PYPL) shares were trading around 2% lower yesterday following the payments company’s first investor day update in four years, in which CEO Alex Chriss laid out plans to expand Venmo’s role in digital commerce.
Chris, who took the helm in September 2023, advised investors in New York on Tuesday that Venmo is a vital part of the company’s efforts to restore consistent, profitable growth.
After years of turbulence the company’s market cap dwindled by more than 80% from mid-2021 through late 2023.
The company also told investors that Venmo could hit $2 billion in revenue by 2027. The last time PayPal provided an annual revenue figure for Venmo was in 2021, when it was about $900 million.
While Venmo – with 90 million U.S. users - has become synonymous with sending money to a friend or family member, monetisation remains challenging due to the low dollar value per transaction.
Paypal expects its [Venmo] strategy to deepen user engagement and help it go head to head with competitors like Block’s Cash App, Zelle and Apple Pay that have been gaining ground by offering simple bank integrations and an expanded range of financial services.
PayPal outlined plans to position Venmo as the default app not just for peer-to-peer transactions, but for spending, saving and becoming what the company calls the “go-to money movement app.”
That means focusing more on its debit card, encouraging in-store purchases, getting more merchants to use “Pay With Venmo” and rolling out features designed to keep funds within the app.
The company expects greater business use to translate into higher transaction volume and more profit. Similarly, by offering increased value within the app, the company expects to encourage consumers to use Venmo to pay at checkout and to keep higher balances in their accounts.
Early attempts to follow down this path have been fruitful, with monetised monthly active users increasing 24% in 2024, and the company now expects mid-single-digit annual growth in Venmo’s user base through 2027.
Between now and 2027, Venmo debit card total payment volume is expected to rise at a more than 20% compounded annual growth rate, while “Pay With Venmo” is expected to expand at double that rate.
Meanwhile, Chriss is also focused on reversing a decline in transaction margin dollars that saw margins contract in 2022 and 2023 before rebounding in 2024.
In an attempt to push Venmo beyond the consumer market and into the world of business transactions, PayPal has teamed up with companies including DoorDash, Starbucks and Ticketmaster.
In its fourth-quarter earnings report earlier this month the company revealed a 50% jump in the number of merchants using Pay with Venmo from a year earlier.
The company also advises that Instacart and MoonPay joined as partners in the latest quarter, with JetBlue becoming the first airline to allow the use of Venmo for booking flights.
“While we are still early in monetising Venmo, we have a proven playbook that is resonating with customers,” Chriss said on the earnings call.
“This gives us confidence as we move to 2025 and beyond.”