“ Braintree had millions and millions and millions of credit cards on file and known users and known devices . But what we needed was a consumer network . We needed a way for the consumer to understand when they came to that next app , how in the heck did their payment information become available .” He needed to make his invisible brand visible so consumers wouldn ’ t get freaked out . He needed a social network .
When Ready found Venmo , it had just 3,000 users , all of them in New York — and had roughly that same number of dollars in the bank . The company had just notified its employees that they were planning to shut the doors . “ They had run out of money , and they didn ’ t have a monetization model .” But Ready thought they might be exactly what Braintree needed .
Venmo is a “ peer-to-peer ” service that connects people directly to other people . “ There ’ s an inherent virality in P2P services . If somebody sends you money , you sign up . You have a strong incentive .” As more people use it , more people sign up — and you build a mass of users who have opted into the service .
Ready imagined merging Venmo ’ s users with Braintree . “ That could be a way to go build the consumer network and have people understand how their payment details were available in the next place .” If people knew that they had signed up for Venmo , and their Venmo information was suddenly available to them across the entire network of Braintree apps and sites , they would understand that their credentials had jumped from site to site because of their membership on Venmo . In 2012 , he decided that he was going to buy Venmo .
“ I had to wire them money to make payroll so there [ would still be ] employees there when we finished closing the deal .”
Ready also knew the key to monetizing the platform . It costs money to send money — to interact with banks and PCIcompliant payment gateways . “ Customers don ’ t want to pay for those services . But if you bring a consumer to a merchant , the merchants are happy to pay for those services . That ’ s how payments have been working for a long time . We can monetize from the merchant side of this .”
With the addition of Venmo to Braintree ’ s arsenal , the company was able to offer a “ push-button ” buying experience that would work not just in a single app but across any app that used Braintree ’ s payment gateway — literally millions of merchants . Mobile shopping was about to get a lot easier .
The following year , Braintree processed $ 12 billion in e-commerce transactions and a third of them were on smartphones . As Ready had predicted , Braintree was able to monetize Venmo while also rapidly growing its user base . That ’ s when he got a call from John Donahoe , the CEO of eBay and its subsidiary , PayPal .
In the world of online payment , PayPal was and always had been the giant gorilla . Founded in 1998 and one of the great IPOs of the dot-com boom , the company grew every year after , and by the time Donahoe reached out to Ready , PayPal had 137 million active user accounts and was processing almost eight million payments every day .
But , like just about everyone else , the company had failed to see the coming importance of smartphones . “ We know we need to rebuild PayPal for native mobile ,” Donahoe told Ready . “ We want you to bring your technology here .” Pay- Pal bought Braintree , and Venmo along with it , for $ 800 million in cash .
As of 2019 , mobile payments make up more than 40 % of PayPal ’ s business : people used it to transfer money over their phones to the tune of $ 19 billion in the last quarter alone . With the push of a button .
Shopping and sending money with our phones has become commonplace . This change didn ’ t happen because of banks , though banks had all the technology they needed to do it . It happened because a few people outside of the banking industry saw what the banks weren ’ t seeing , and they seized the opportunity . But banks see it now .
In 2016 , a consortium of some of the biggest banks in the United States — JPMorgan Chase , Bank of America , Wells Fargo , PNC and others — formed a joint venture called Early Warning Services . The following year , the company released Zelle , a mobile app that lets users send money to other Zelle users — directly competing with Venmo .
Because Zelle has direct access to all of its banks ’ members , its network has grown quickly , reaching 27.4 million US users and processing $ 75 billion in payments in 2018 . And because Zelle is operated directly by the banks , it is able to move the money instantly , without Venmo ’ s one- to three-day delay .
The only thing Venmo has that Zelle doesn ’ t have is a social feed — and to some Zelle users , this is an improvement : many people are resistant to the idea of broadcasting their financial transactions out into the world . But this , too , might be something that is shifting beneath the banks ’ notice , because plenty of people — especially younger people — do prefer the social feed . “ 30 % of all Venmo payments use emojis ,” Ready said of his service , “ and that number is growing .”
It ’ s hard to know what to make of this . Maybe the idea of an emoji-based social feed that broadcasts our spending is a fleeting moment in history . But it absolutely reflects a fundamental shift in the way our society is interacting with , and talking about , money . Thanks in part to Venmo , there are people who will never walk into a bank branch , because they can beam each other money from their phones . And after centuries of taboo around the idea of talking about finances , people are willingly transmitting this information out to the world . A generation ago , this would have been unthinkable . Even in 2010 , it was practically unthinkable .
Cultural change is happening right in front of us , incredibly quickly . And it ’ s not yet clear if the banks will be able to keep up .
Daniel P . Simon is a writer , entrepreneur and financial communications expert . He has been part of the Fintech Revolution since its inception , advising on some of the biggest brands in the space including Morgan Stanley , Bloomberg and Goldman Sachs . Daniel ’ s focus on finance and its future led him to become CEO and Co-Founder of Vested , an integrated communications firm where he and his team partner with top financial and fintech companies . For more information on Daniel Simon and his new book , The Money Hackers , visit https :// danielpsimon . com /.
This article was adapted from The Money Hackers : How a Group of Misfits Took on Wall Street and Changed Finance Forever , by Daniel P . Simon ( HarperCollins Leadership , 2020 ).
www . MoAF . org | Fall 2020 | FINANCIAL HISTORY 17