Cash, credit or mobile app: the rise of Venmo

Paying your friends back has never been so easy—or entertaining.

Venmo—the latest application to blow up on the social media scene—is a mobile wallet that allows users to instantly transfer money to each other with only a smartphone and a bank account. The money-sharing system has become increasingly popular on college campuses for its accessibility and social dimension. Many see Venmo and services like it as having the potential to revolutionize the way people use money in their daily lives.

“Cash is fine but not everyone will have the correct amount of cash on them when paying for stuff,” said freshman Helen Lu, a Venmo user. “With Venmo, there are no more IOUs or waiting for someone to remember to pay you back.”

Venmo—which was developed in 2009 by Andrew Kortina and Iqram Magdon-Ismail—was designed to "enable anyone with a mobile device to send and receive payments via text message,” as stated in its 2009 executive summary.

This vision has come to fruition for many Duke students, who find it easier to use Venmo than to pay with cash or credit card, especially when paying a friend back for food or splitting a bill and cab fare.

“I mostly use it on the weekends when my friends and I go out or order food,” said freshman Daniel Schlabach. “It's just a lot easier to deal with than getting cash from an ATM and then carrying it around or writing a check. You can send exact amounts to people and have it go straight into your bank account.”

Venmo is in some ways self-propagating, in that after awhile, not having Venmo can actually become an inconvenience, said David McAdams, professor of business administration at the Fuqua School of Business.

“It’s called a network effect when the value of a service increases as more people use it," McAdams said. "Once everybody on campus starts using Venmo, you’re going to need to get a Venmo yourself."

Senior Daniel Stublen noted that transactions are more difficult when his friends don’t have Venmo.

“My friend from home, who doesn’t go to Duke, visited and did not have Venmo so it was more difficult to go to restaurants and split bills,” Stublen said.

Social life of money

A unique aspect of Venmo’s money-sharing service is its social news feed, whereby people can see what friends and other students are paying for and to whom. Bringing this social dimension to money was part of Venmo’s innovative business model, noted Nikhil Joseph, an analyst at Mercator Advisory Group.

“It appeals to millennials and young people,” Joseph said. “Before Venmo no one thought that people actually wanted to share what they’re paying people for, but clearly there’s interest in the market to do that, and people use that in their own way.”

Some marketing analysts such as fifth-year Ph.D candidate at Fuqua Avni Shah believe that the social media dimension of Venmo might comfort fellow spenders.

“Instead of struggling with your decisions and wondering if I should have paid for that or not, I can look at Venmo and see that other people are also buying these other things. Overall, it lightens the load for people,” said Shah, who will begin as an assistant professor of marketing at the University of Toronto this summer.

On campus, however, frequent Venmo users’ reactions to the social feed were more tepid.

Freshman Kelsey Graywill noted that she very infrequently looks at the feed, calling it “inconsequential.” Many students, Graywill included, also noted that they would much rather have their monetary transactions be kept private rather than public.

“I don’t see a reason for it to be published and I’ve already got enough of my information on the Internet," she said. "Why put my transactions between my personal circle of friends out there too?”

Many users, however, think the benefits of Venmo outweigh the privacy concerns.

“I don’t mind the public aspect of it mainly because I wouldn’t use Venmo for something really sensitive, and if I did I’d lie in the description of what the payment was for,” freshman Parmida Mostafavi said.

She added that within the settings of the application, users can control how much information they want to be available to the public.

Venmo’s social feed can actually serve an entertainment value, Mostafavi said.

“I’ve seen people put stuff like sex or blowjobs or drugs on there,” Mostafavi said. "But I don’t think anyone takes these seriously. They’re actually pretty entertaining, to be honest.”

Dark side of convenience

Despite the benefits Venmo provides, it has come with its criticisms. Shah, for example, added that Venmo might contribute to poor budgeting by college students.

“It makes paying not seem as real,” Shah said. “When I think of my phone I think of something I can communicate with. It doesn’t seem to be painful to pay, like it would be if I had to hand over cash, and I think it might lead to overspending because the money is less salient.”

Schlabach said some students and friends of his choose not to use Venmo because they are concerned about the security of using a mobile payment system, such as if Venmo were to face a massive data breach and financial information be stolen.

Matt Tatham—an analyst at Experian, a firm that provides fraud prevention services— noted that balancing convenience and security is harder than ever.

“What we’re seeing as technology comes out into the open space is that fraudsters are way ahead,” Tatham said. “They are always going to be the first adopters of a new platform, trying to find ways to steal money, so any company in that space has to have the right fraud measures in place to authenticate the consumer, and that’s tough.”

That being said, Ben Zhao, professor of computer science at University of California Santa Barbara, said that Venmo is ultimately more secure than even credit card companies.

“From a technical standpoint, it's not that hard,” Zhao said. “There’s no actual currency going through your smartphone. In that sense, its much more secure than, for example, using credit cards, where your information and account numbers and codes can actually be skimmed from the machine.”

Zhao also added that Venmo could be trusted to protect its users because it’s in the company’s interest to do so.

“When the target is so obvious, it’s oftentimes a less worthwhile target,” Zhao said. “Venmo has all the incentive in the world to secure account number information, and anyone dealing with financial transactions will feel the need to encrypt and triple-lock their data.”

Despite Venmo’s current success, Zhao noted that it is unlikely Venmo will continue to thrive as established firms like Facebook and Apple develop similar services. But although Venmo’s future might be uncertain, Zhao is confident that mobile payment systems will undoubtedly continue to grow in the future.

“We’re all mobile and we want access all the time,” Zhao said. “Money is no exception.”


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