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Here’s What Venmo’s Swelling User Base Means for PayPal

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May. 16 2019, Published 2:39 p.m. ET

Venmo clocks 40 million active users

PayPal (PYPL) recently disclosed the size of Venmo’s user base for the first time. When it released its first-quarter earnings results last month, PayPal revealed that Venmo had topped 40 million active users as of the end of the quarter, meaning that Venmo was more than twice as large as its Square (SQ) competitor Cash App, which had 15 million users at the end of 2018.

PayPal CEO Dan Schulman said on the company’s first-quarter earnings call with analysts that Venmo’s user base was continuing to grow rapidly.

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Venmo’s expanding user base means an expanding revenue opportunity for PayPal. As Venmo’s user base swells, more merchants are adopting it as a payment option for their customers. PayPal makes money by charging merchants a transaction fee to process Venmo payments. Venmo processed transactions worth $21 billion in the first quarter, an increase of 73% year-over-year.

Top brands adopt Venmo as a payment option

Some of the more prominent companies that have adopted Venmo as a payment option include Uber (UBER) and GrubHub (GRUB), leaders in the ride-hailing and online food delivery markets, respectively. Uber’s share of the ride-hailing market in terms of revenue in the United States at the end of March was 69% compared to the 29% share of its closest competitor, Lyft (LYFT), according to Second Measure estimates. GrubHub held 32% of the US food delivery market at the end of March. In comparison, DoorDash had a 30% market share, and Postmates had a 10% market share.

PayPal expects Venmo’s merchant adoption to continue, estimating that Venmo could bring it $300 million in revenue this year.

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