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PayPal’s Venmo Monetizable Base Is Expanding

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Oct. 31 2018, Updated 6:30 a.m. ET

Paying with Venmo generates revenue for PayPal

About a quarter of Venmo users are using the service in ways that can generate revenues for PayPal (PYPL). As a result, Venmo’s monetizable base has expanded considerably in just a few months. Venmo is PayPal’s youth-oriented service that people can use to receive and send money. Users can also pay for purchases online and in stores.

PayPal makes money from Venmo in a variety of ways, including when Venmo balances are used to pay for purchases and when people use ATMs to access their Venmo balances.

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More than 2 million merchants accept Venmo

PayPal exited the third quarter with 24.0% of Venmo subscribers using the service in ways that can generate revenues for the company. This metric increased from 17.0% at the end of the second quarter and from 13.0% in May.

More than 2.0 million merchants in the United States accept Venmo payments. Businesses that allow customers to pay with Venmo include Uber and GrubHub (GRUB), a leader in the online food ordering and delivery space.

Penetrating the restaurant market with Venmo

In the business of processing payments for merchants, PayPal competes with Square (SQ) for market share. Because Square has an in-house online food ordering and delivery service, PayPal’s relationship with GrubHub could prove vital in its efforts to penetrate the restaurant market with Venmo.

In 2017, GrubHub bought Yelp’s (YELP) food delivery service, Eat24, to extend its customer reach. In addition to delivering meals from restaurants, GrubHub also delivers fresh food ingredients via Blue Apron’s (APRN) on-demand meal kit delivery program being tested in parts of New York City.

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