(Bloomberg) -- The battle to become the country’s preeminent cashless mobile payment platform is heating up.
Starting Thursday, Uber Technologies Inc. riders in the U.S. will see a "Pay with Venmo" option when selecting a payment method for their trips. The feature will appear right next to Apple Pay, Apple Inc.’s competing mobile payment service. The ride-hailing giant is the largest retailer to accept Venmo payments to date, and the move is an indication of how the platform plans to make money.
“We’ve been adding a lot to Pay with Venmo over the last several months,” said Bill Ready, chief operating officer of PayPal Holdings Inc., which owns Venmo. “There have been 6 million transactions inside of Venmo in the last year alone that were discussing Uber,” he said, adding that the implication was clear that the partnership would be a profitable one.
Venmo has been around for years, mostly facilitating cash transfers between users for free. It wasn’t until late last year that the company introduced the Pay with Venmo option, which allows it to charge retailers a transaction fee. The feature is now available at more than 2 million merchants, and is part of a broader initiative at PayPal to monetize Venmo, something Chief Executive Officer Dan Schulman has said he’s confident will happen.
The push for monetization comes as transaction growth on Venmo is slowing, falling to 80 percent last quarter compared to the prior year. In the quarter before that, year-over-year growth was 86 percent. Investors will get another look at this metric when the firm reports earnings later this month.
PayPal acquired the peer-to-peer payment platform as part of its purchase of Braintree in 2013. The service is popular with millennials and has a cachet the company believes will drive revenue growth. Ready, who was previously the CEO of Braintree, has said that up next Venmo will go from a digital wallet used between friends, to a digital wallet used wherever customers want.
Competition in the payments industry is stiff. While Apple Pay has been slow to catch on, it has recently started gaining traction. According to Loup Ventures, the number of active Apple Pay users doubled in 2017 to 127 million globally at the end of the year. But that’s still small compared with PayPal’s user base of about 227 million. Uber has offered Apple Pay as an option since 2016, but the company says it still only accounts for a small portion of transactions.
“It is limited obviously to the devices that have Apple Pay, and then not all of those people use it,” said Marco Mahrus, Uber’s head of financial partnerships and programs. “Apple Pay is definitely not the lion’s share of payments on Uber." But Mahrus added that the experience gets good reviews from customers, and that its use is growing.
As with Apple, Venmo’s pitch to vendors is that offering additional payment options can increase the percentage of interested users that follow through with purchases. This is good for the retailer, and for the payment platform. “The merchants are seeing this as a way to engage with a customer base that’s extremely valuable,” Ready said.
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