It was not the spot where one might expect to find a plethora of payment-app options to square up the tab, in early December at a makeshift coffee bar near the front desk of the Ocean Community YMCA’s branch in Mystic.
But at the bottom of a hand-scrawled white board listing the beverages of the day, Apple Pay and Google Pay were noted in large letters among those options — and in smaller letters, Venmo.
For those buying coffee via app, transactions are split roughly equally these days between the Apple and Google apps, the proprietor guesstimated. But when it comes to the teen crowd caffeinating up? It’s Venmo all the way at the YMCA coffee counter. That is not the case everywhere. These days at the Westfield Trumbull mall, most stores offer payment app options from Apple, Google or Samsung — there are only a few holdouts who have yet to go there.
But whereas that YMCA barista spelled out her customers’ payment-app options, at many stores you have to ask what is accepted.
If Venmo is on the menu these days in some instances, increasingly so is Zelle, which handled $49 billion in transactions between July and September last year, just three years after launching with direct links to bank accounts. That’s versus $27 billion on Venmo.
For the best Connecticut Magazine content, plus the week's most compelling news and entertainment picks, delivered right to your inbox, sign up for our weekly newsletter.
But Venmo was the pioneer, with its platform allowing people to pay each other at the push of a button. The app was created by Andrew Kortina and Iqram Magdon-Ismail after graduating from the University of Pennsylvania, with their friendship dating back to freshman year when they were roommates. After eking out subsistence pay designing websites, they took jobs at a succession of startups including Bitly, the app that shortens web addresses for Twitter links.
Starting in 2009, they spent weekends brainstorming startup ideas and, while helping a friend get a yogurt shop open, discovered the limited options for small shops when it came to payment systems. The idea for Venmo was born (the name is derived from the words vendor and mobile) and after three years of development they would sell the company for $26 million.
PayPal has owned Venmo since 2013, with company CEO Dan Schulman saying last October that Venmo was processing $300 million in payments daily, with fees and other income totaling $400 million on an annualized basis.
“Mobile is a major driver of our growth,” Schulman said. “We see a lot of good runway in front of Venmo.”
Last year, “eWallet” platforms like PayPal, Apple Pay and Venmo trailed only credit cards for online purchases in North America, according to WorldPay’s annual study of payment preferences globally, at 20 cents for every dollar spent. That was a penny ahead of debit card transactions, and WorldPay predicts that credit cards will swap positions with payment apps within the next few years in the digital realm.
Inside stores it is a different matter, however, with WorldPay estimating apps were used in only 3 percent of transactions last year, and on pace to add only a percentage point a year through 2022 — mostly at the expense of cash, with credit card use also expected to rise to 44 percent of payments at checkout.
And WorldPay does not reference the most important player in retail today: Amazon, which has yet to unleash a full marketing blitz for its Amazon Pay service to rival its pushes for Amazon Prime, Alexa and other major initiatives.
If millennials hold the future in their hands, then Venmo appears to be the one to watch for now. At installation, Venmo’s app encourages new users to sign up using their Facebook account, even as the social media giant hypes its own Facebook Pay app that, like Venmo, can be set to push out alerts on one’s purchases to acquaintances.
And oddly, PayPal is not listed as an option to complete purchases on Venmo, instead requiring accounts to be linked to a credit card or bank account.
This summer, PayPal will introduce a Venmo credit card in concert with Synchrony Financial, the Stamford giant that manages consumer finance programs for major retailers.
Three years ago, a joint venture of Bank of America, JPMorgan Chase, Wells Fargo and other banks launched Zelle, offering a payment app linked directly to customer accounts.
Connecticut has its own payment-app startup in Glastonbury called Payrailz, created by former Webster Bank executive Fran Duggan, marketed as a platform for banks to extend to their customers and which includes a “person-to-person” function allowing people to pay each other instantly using their mobile phones.
“We do offer P2P, along with account-to-account, bill pay and other services such as bill negotiation and the ability to offer … real-time payments,” says Mickey Goldwasser, vice president of marketing for Payrailz. “Today’s consumers want everything to be fast and simple, and the ability to take care of all their payments in one place is key. Rather than having separate apps for every type of payment, we do it all together in one place. And that one place is through their trusted bank or credit union.”
Experts say person-to-person payment apps like Venmo and Zelle offer all the security one demands of other options like debit cards — but it takes a little more vigilance beyond keeping personal identification codes private and other bank-card basics.
- Take the time to read the terms and conditions and keep a copy to reference for any disputes
- Activate PIN and/or biometric security features (i.e. fingerprint) as log-in requirements
- Enable text-based authentication for any purchase as a guard against account being hacked
- Create text or email notifications for purchases, as a tip for any illicit account activity
- Maintain large balances in payment app account; instead, link the app to an FDIC-insured account
- Use passwords or PINs identical to those in use for other online and financial tools
- Keep purchase settings set to public mode, which allows others to eye your spending via social media
- Make the mistake of sending money to the wrong person — double-check the ID before sending