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Salome Gongadze is tired of hearing about crypto. Whether it’s her friends talking about their latest gains or ads clogging up her newsfeeds, she can’t seem to escape the world of Bitcoin and digital wallets.
So when the 23-year-old, who works in public policy research in the Washington area, opened up her Venmo account recently, she encountered an unwelcome surprise — the payment app had rolled out its new “Cash Back to Crypto” feature, which allows credit cardholders to automatically purchase crypto from their Venmo account using the cash back they’ve earned from purchases.
“I don't get the point of it, that's not what Venmo is supposed to be for,” said Gongadze, who uses Venmo a couple times a week. “I think crypto is stupid, and now this is just another place where I have to see it.”
Gongadze’s frustration echoes similar sentiments expressed across Twitter recently as avid Venmo users received multiple emails and notifications from the company touting the new offering, which first started in August. It also highlights how consumer-focused companies in today’s crypto-crazed world are feeling the pressure to provide services connected to digital coins and are willing to risk alienating — or confusing — a portion of their user base in order to keep up with the demands of a growing constituency for whom crypto is a new fact of life. That pressure is likely only magnified during a month like this, when Bitcoin rallied to yet another all-time high.
“When they do market research, they hear lots of people saying, ‘We need crypto,’” said Eric Johnson, professor of business at Columbia Business School. “Whether that is essential to their business remains to be seen.”
PayPal Holdings Inc. which owns Venmo, said in April that it would roll out services for Venmo customers to buy, sell and hold cryptocurrencies. The latest “Cash Back to Crypto” service allows users to choose from four different coins — Bitcoin, Ethereum, Litecoin and Bitcoin Cash.
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Along with Venmo, other finance firms are getting into crypto, such as Renaud Laplanche’s Upgrade Inc. which introduced a Bitcoin rewards card in July. Robinhood Markets Inc. has expanded its crypto features, while Stripe Inc., which lets merchants accept customer payments, is growing its crypto team, according to recent postings. Even retail giant Walmart Inc. is joining in, with a pilot program that allows shoppers to buy Bitcoin at Coinstar kiosks in some of its U.S. stores.
Legacy players such as Goldman Sachs Group Inc., Bank of New York Mellon Corp. and DBS Group Holdings Ltd. are also beginning to offer crypto-related services and trading. On top of all that, the $6.9 trillion U.S. ETF industry is racing to release exchanged traded funds tied to Bitcoin after the first futures-based ones from ProShares and Valkyrie Investments started trading this week and gathered more than $1 billion in assets.
"If people want to get into crypto, that has been easily and accessibly available for a long time,” said Dan Egan, managing director of behavioral finance and investing for robo-advisor Betterment. “It's not like something new is happening. It's about convenience and the benefit of having a bunch of things in one place and managed by one company.”
Splitting and sharing payments is still the core of Venmo’s platform, said a PayPal spokesperson. Offering crypto is “part of Venmo’s continued evolution from a peer-to-peer payments app to a more holistic offering that our customers rely on in their everyday financial lives.”
One flaw in payment companies offering crypto services, according to Egan, is that very few people actually use cryptocurrencies as currencies — they’re mostly instruments for trading and speculating, at least right now.
That’s not to say some of the recent crypto entrants won’t find some success. Even though it only debuted this spring, Venmo’s cryptocurrency wallet is already a top-three crypto wallet worldwide among those with payment features, as measured by active users, according to Crone Consulting LLC. The research firm defines an active user as one that interacts with a wallet in any way twice a month, and Venmo has about 18% of the global share.
“Venmo users fit the psychographic, technographic and demographic profile of crypto currency investors,” said Richard Crone, chief executive officer of Crone Consulting. In fact, Venmo’s service could help make it the dominant cryptocurrency consumer wallet tied to payments by active users in as little as the next 18 months, according to Crone.
Crypto Wallets Duke It Out in Payments
Global market share of crypto wallets with payment features by active users
Source: Crone Consulting LLC
Active users interact with their wallet at least twice a month
Venmo’s push is putting it on a crash course with rivals like COINBASE Global Inc., currently the second-biggest crypto wallet tied to payments with 20% share of active users. Venmo’s parent PayPal is number one in such service today, with 21% share, but it’s been available for a year, while Venmo’s crypto capabilities only came out in April.
Some consumers like sending each other Bitcoin and being able to buy and sell crypto via apps. Cash App, the mobile-payments service developed by Square Inc., generated $2.72 billion in revenue and $55 million in gross profit from Bitcoin transactions during the second quarter, each up about three times year over year.
For those predominantly interested in crypto, a new feature involving digital coins could initially attract users — who then stick around for other, non-crypto services.
“They may have waning interest in crypto, but at least they’ve become a more regular user of the app, and they can move them into investing or banking or lending,” said Chris Brendler, senior research analyst at D.A. Davidson & Co.
Tate Howard, a 21-year-old student at Mississippi State University, has bought coins like Ethereum and Bitcoin, and recently tried out Venmo’s new feature. He was less than impressed.
For one, the limited selection of coins was a negative, he said, as he’d like to see more available like Ripple and Cardano. It was also difficult to transfer the coins he had bought in the app to a digital wallet. To him, Venmo is better suited for how he’s previously used it — sending or requesting money from friends and family.
“They’re just hopping on a wave of crypto,” he said.
— With assistance by Kurt Wagner
