PayPal Is Exploring a New Way to Monetize Venmo

Strong demand for a Venmo credit card

PayPal (PYPL) is reportedly in talks with banks about issuing credit cards tied to Venmo, a move that could see the company open another revenue stream with its Venmo app. According to a Wall Street Journal report, PayPal is close to selecting Synchrony Financial (SYF) as its credit card partner.

PayPal COO Bill Ready said on the company’s first-quarter earnings call last month that there’s definitely been high demand for a Venmo credit card, but he declined to say whether the company was about to begin issuing such a card.

PayPal Is Exploring a New Way to Monetize Venmo

Expanding Venmo’s monetizable base

At the moment, PayPal issues Venmo debit cards in partnership with Mastercard (MA). People can use the Venmo debit card to withdraw cash at ATMs. Square (SQ) also issues debit cards linked to its Venmo competitor, Cash App. The Cash App card is issued in partnership with Visa (V), and people can use it to withdraw funds at ATMs or to pay for purchases.

PayPal’s issuing a Venmo credit card could help it expand Venmo’s monetizable base, which stood at 29% at the end of 2018. Right now, PayPal monetizes Venmo through three main channels: transaction fee charges to facilitate Venmo payments for merchants, 1.0% fees on Venmo instant bank transfers, and charges associated with the Venmo debit card. A credit card issuance would see PayPal add another monetizable feature to Venmo.