Venmo's increased engagement may drive elusive revenue growth

Clues to Venmo's quest to deliver positive revenue to PayPal have surfaced in an area the company may not have initially expected. The P2P service, based on the time its users spend with it, has the capability of luring users into other services attached to Venmo.

"The new net actives that are coming in on Venmo have more engagement than previous net new actives, and that new engagement is around the monetizable services," PayPal CEO Dan Schulman said Wednesday during the company's second quarter earnings call. "They are coming into a value proposition, and they are aware of that, so they are using it more and more. Increased engagement, increased monetization and increased revenue."

PayPal is "seeing really nice quarter-over-quarter revenue growth" for Venmo, Schulman said, but did not indicate what those numbers are. "We are well exceeding, not just our budget, but our most recent forecasts on Venmo revenues."

Peter Foley/Bloomberg

Those efforts are likely to include integration of Venmo into the Hyperwallet service for companies to manage payments through marketplaces or freelancer workers; or with the Xoom money transfer service.

Venmo total payment volume was $24 billion during the second quarter of 2019, up 70% over last year. It's an indication the service has continued its momentum after

PayPal, three months ago, for the first time revealed its number of active users for the payment platform to be at 40 million users moving $21 billion in the first quarter.

"One of the best indicators about the future of our business is the new cohorts of customers we are bringing on," said John Rainey, chief financial officer and executive vice president of global customer operations at PayPal.

In looking at the various ways PayPal can monetize Venmo, either through Pay with Venmo, Instant Withdrawal or the Venmo debit card, Rainey said the revenue options should each grow quarterly.

PayPal also pointed to its past acquisitions and partnerships as future drivers for revenue through iZettle, MercadoLibre, Uber and Paymentus.

After revealing in January that the company had entered a strategic partnership with Paymentus, a paperless billing service, Schulman noted it has taken more time than expected to get that process in place and generate revenue.

Though touched on only briefly during the earnings call, PayPal is among the payments companies aligned as potentially being a partner in Facebook's Libra currency project. Visa, Mastercard, Stripe and others have made similar overtures to Facebook, with Visa CEO Alfred Kelly saying this week that an agreement with Libra at this time is strictly "non-binding" until more information is available from Facebook and the result of Congressional pressure is better understood.

PayPal reported revenue of $4.31 billion for the second quarter of 2019, a 12% increase from the previous year, and cash flow of $1.2 billion. The company also added 9 million new active accounts, an increase of 17% that lifted total numbers to 286 million. The new activities added to a company record of 41 million new accounts over a 12-month period.