Venmo has only just launched its latest feature but analysts already think it could develop into a significant source of revenue for the money transfer app’s parent company, PayPal.
The feature, called ‘Pay With Venmo’ makes it easier to make purchases in apps by providing a payment option similar to the PayPal button already familiar to many online shoppers. The feature is only being rolled out to two merchants so far: the on-demand food delivery app Munchery, and the mobile sports ticketing app GameTime.
According to a Jefferies analyst note by Jason Kupferberg sent to investors on Monday (Feb. 29), two-thirds of the 1,000 Venmo users surveyed by the firm said they would use Pay With Venmo at least once or twice a month. 68% of the 1,000 Venmo users surveyed by Jefferies are in the coveted millennial bracket, between 18 and 35 years old.
Peer-to-peer money transfer is a hard business with thin margins. Venmo could soon start contributing towards PayPal’s bottom line by charging merchants for Pay With Venmo the same way PayPal charges its merchant partners. Kupferberg thinks the PayPal subsidiary could add between 1.2% to 3.1% to Paypal’s total 2017 revenue.
Venmo is rolling out Pay With Venmo to merchants throughout 2016. PayPal CEO Dan Schulman said in the company’s last earnings call he anticipates the subsidiary will start having a positive impact on PayPal’s finances in 2017 or 2018.