Venmo continues to test its physical debit card (PYPL)

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PayPal-owned peer-to-peer (P2P) payment app Venmo is testing its first physical debit card, which enables consumers to pay in-store, online, or via mobile by using their Venmo balance, according to TechCrunch. The mobile payment feature works at any retailer that accepts PayPal.

Users who are eligible to receive a card will see a prompt at the top of their Venmo feed when opening the app. Participants will be sent the cards for free, and are required to designate a reload method, such as a bank account, that will be used if their Venmo balance isn’t high enough to cover a purchase. Venmo employees initially tested the card in June, and now some users of the payment app are able to participate in this beta program. The Venmo card is a Visa debit card issued by Metropolitan Commercial Bank via Shift Financial, a company that provides physical and virtual debit cards to payments providers.

The debit card could be a new channel for Venmo to drive revenue and remain competitive.

• The card eliminates the need for users to transfer funds to their banks.Through the Venmo app, users must cash-out their balance to their bank account before they can access the money. The funds could take 24 hours to reach an account, but the debit card would enable users to bypass this process by allowing them to directly spend their Venmo balance. And, the debit card provides Venmo with a new channel to monetize its services. PayPal can increase revenue through interchange fees — which are charged to merchants by issuers — on a per-transaction basis. These fees can have a significant impact; Amex made $4.69 billion in interchange fees in Q4 2017, for example.
• Square recently launched its own debit card.Square Cash, the mobile P2P payment offering from Square, officiallylaunchedits debit card in July. Square’s debit card has a more appealing physical design — it’s customizable — than Venmo’s, which features a photo of dough on it. And launching its offering first might have given Square a competitive advantage over Venmo. Venmo must remain competitive as more payment companies develop similar offerings. Zelle, a bank-based P2P offering operated by Early Warning, recentlylaunchedits own P2P payment app, positioning itself as a direct competitor to Venmo.

Jaime Toplin, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on mobile P2P payments that:

• Forecasts the growth of the P2P market, and what portion of that will come from mobile channels, through 2021.
• Explains the factors driving that growth and details why it will come from increased usage, not increased spend per user.
• Evaluates why mobile P2P isn’t profitable for companies, and details several cases of attempts to monetize.
• Assesses which of these strategies could be most successful, and what companies need to leverage to succeed in the space.
• Provides context from other markets to explain shifting trends.

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