New Features Make Venmo an Even Greater Threat for Neo-Banks

With a slew of new functions – like support for buying and selling cryptocurrencies, budgeting tools, and savings features –  Venmo is poised to become an even greater threat to existing neo-banks, which have distinguished themselves with many of the same tools. Venmo, which considers itself a digital wallet, is owned by PayPal and benefits from that company’s industry experience and deep pockets.

With a parent company as profitable as PayPal, Venmo is spared from the concern over available capital that plagues so many neo-banks. With this freedom, Venmo has the capacity to spend more on innovation and offer more competitive rewards than its neo-bank competitors.

Also working to the digital wallet’s benefit is Venmo’s vast user base. With some 70 million active users, Venmo will be able to market its new banking-oriented offering at very low cost. If Venmo decides to pursue a large share of the neo-bank market in earnest, existing actors in that space will face a significant – if not existential – threat.

Business Insider reports more on this topic:

“Venmo parent company PayPal said during its Q4 2020 earnings that the mobile payments app will get a slew of upgrades, including support for buying and selling cryptocurrencies, a savings feature, and budgeting tools, TechCrunch reports.

PayPal also intends to integrate money-saving service Honey into both the PayPal and Venmo platforms, offering users access to Honey features like a wish list, price monitoring tools, deals, coupons, and rewards.

Combined with other recent additions, Venmo’s latest features bring the mobile payments app to the brink of direct competition with US neobanks. Venmo has offered a debit card since 2018, and it launched a credit card in October complete with personalized rewards. And in January, the payment app introduced a mobile check-cashing feature, announcing that it would waive fees for customers who used the tool to deposit stimulus checks.”

Overview by Laura Handly, Research Analyst at Mercator Advisory Group

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