Ask nearly any of today’s college students how they split the bill for dinner, pay their roommates for cable, or even pay their rent and you will likely hear one common answer: Venmo. Peer-to-peer (P2P) payment services have exploded in popularity leaving many to wonder how bills were ever paid before them. Since just two years ago, P2P payment users have increased by 31.6 million users in the U.S. according to research from eMarketer. How did this booming industry get started and who are the current big players? Let’s take a look. eCommerce payments are born The origins of P2P payments can be traced back to 1998, when Cofinity launched as a financial transaction software company in Silicon Valley by founders Ken Howery, Luke Nosek, Max Levchin, and Peter Thiel. In late 1999, Cofinity would go on to launch its flagship product, PayPal. Noticing the potential of the money transfer business, Elon Musk, now co-founder and CEO of Tesla, facilitated a merger between Cofinity and his business. PayPal would go on to become the premier way to move money online. A key driver of PayPal’s adoption was its integration with the popular eCommerce platform, eBay. Following its IPO in 2002, PayPal was acquired by eBay for $1.5 billion. Over the following decade, PayPal would grow to more than 100 million active user accounts spanning 25 different forms of currency.

A forgotten wallet

As PayPal was gaining popularity, Andrew Kortina and Iqram Magdon-Ismail met as freshman roommates at the University of Pennsylvania. Their bond grew during college, leading the two computer science students to work on several projects together during and after college. While attending a local jazz show, the two brainstormed the idea of being able to purchase a band’s live set by sending a text message that would return an MP3 file via email. It was here that the name Venmo was created, a combination of vendere (Latin for “to sell”) and mobile.

During a weekend working on the music service idea in New York, Magdon-Ismail realized he had forgotten his wallet in Pennsylvania and would pay Kortina back via check for purchases made throughout the weekend. Quickly, the pair realized how inconvenient this solution was and that there was an unsolved need for quick and easy P2P transactions. Though PayPal was convenient for online purchases, its P2P functionality needed to be accessed via a computer. In a world where mobile was quickly emerging as the ideal platform for consumers, Kortina and Magdon-Ismail began pivoted their music purchasing platform to a P2P payment service that users would operate primary through SMS messaging.

The idea quickly appeared to be a hit. The Venmo co-founders would go on to raise $1.2 million of seed funding to develop applications for iPhone and Android users. Following its public launch in March of 2012, Venmo attracted the attention of payment system company Braintree, who would acquire Venmo for $26.2 million just over five months following the launch.

PayPal acquisition and Venmo today

Venmo continued its explosive growth among money-transferring millennials, but in 2013 its parent company Braintree was looking for a buyer. Coming full circle, PayPal acquired Braintree in late 2013 for $800 million, citing that Venmo was a key motivation to get the deal done.

Today, Venmo has more than 40 million active users that are on pace to transfer more than $85 billion through Venmo throughout 2019. Venmo leads several large banks in terms of digital users, outnumbering Bank of America’s 37 million and Wells Fargo’s 29.8 million. In fact, according to the Wall Street Journal, there is only one U.S. bank with a larger digital footprint than Venmo: JPMorgan Chase with 51 million users.

Venmo has also dipped into the physical payments industry with its Venmo card that allows users to use their Venmo balance by swiping a MasterCard-network enabled debit card at registers.

Cash App

Cash App is a competitor to Venmo that is owned by financial services company Square Inc. The service was created after Square fell short to PayPal in the acquisition talks with Braintree. The service operates with great similarity to Venmo in that users with the mobile app can send and receive payments to peers. It also offers a physical card, the Cash Card, for users to spend their balance at retail locations. To help compete with Venmo’s card, the Cash Card offers promotional discounts called “Boosts” that give a certain percent or dollar off at specific retail chains or categories. Despite doubling its number of active user accounts from 2017, Cash App entered 2019 with just 15 million users compared to Venmo’s current 40 million.


Big banks have certainly taken notice of the demand for easy P2P payments and in 2017 launched Zelle. The service is run by Early Warning Services, which itself is owned by Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, US Bank, Citibank, and Wells Fargo. With tight integration through these bank owners, Zelle places transferred money right into a user’s bank account, not a separate balance like Venmo and the Cash App. Additionally, Zelle does not require users to set up an account if they are members at one of many participating banks. Zelle has mounted a significant challenge in the P2P payments race and passed Venmo in terms of volume of transactions in July of 2018. Looking at the entire year, Zelle nearly doubled Venmo’s total transaction volume.

Though one would be quick to say Zelle is winning the P2P payments battle, adoption remains lower than Venmo across every generation. Forbes notes that a key driver in the difference regarding transaction volume could be that Zelle is used by older generations as a more traditional bank transfer for items such as alimony payments.