CardsFTW #87: Amazon Ditches Venmo

Plus, more credit building

CardsFTW #87: Amazon Ditches Venmo
What does the color of your Venmo card say about your personality?

Amazon Stops Accepting Venmo Payments

The payments world was abuzz last week with the news that Amazon announced it would no longer accept direct payments via Venmo.

I would reply and ask why, but then I read that last part. 😭

I was always a bit puzzled as to why direct merchant acceptance of Venmo was gaining traction. Venmo is a wonderful peer-to-peer tool, as transfers are free between users. Everyone loves free instant money movement! High-speed money movement is normally expensive (think wire transfers or direct debit card transfers like Visa Direct or Mastercard Send). Venmo, which is a subsidiary of payment giant PayPal, charges businesses 2.9% to accept Venmo. Most merchant processors also charge around 2.9% to accept credit and debit cards. This leaves no advantage to accepting Venmo directly from a cost perspective.

A big company like Amazon doesn’t pay 2.9% to accept debit or credit cards, of course. That blended rate pricing, popular with modern merchant acceptance platforms like Stripe or Square, simplifies a complex set of pricing that can vary for every type of card you accept. Large companies like Amazon have teams that optimize payment routing, ensuring that the lowest cost is paid to accept any given card. Amazon also negotiates pricing incentives with payment networks, sometimes achieving very low rates on particular card categories.

Venmo has long offered a debit card that is attached to your Venmo account. The card enables users to access their Venmo balance (which is effectively a bank account) anywhere Mastercard is accepted. Users didn’t need Amazon to accept Venmo to pay for goods and services on Amazon with their Venmo balance; they could simply use their Venmo debit Mastercard number.

That remains true today. I don’t have any insider information on the pricing, but I suspect that:

  • Amazon paid less than 2.9% to accept Venmo
  • Not many people use Venmo to pay on Amazon directly
  • Amazon will pay even less than whatever they paid to accept Venmo directly to accept the Venmo debit Mastercard

The growing competition for real-time payments from Venmo, Zelle, and Square Cash is a meaningful trend in the consumer payment space. Many service providers, such as small salons and contractors who have not accepted credit or debit cards, now accept Venmo, Zelle, and Square Cash in addition to traditional methods like cash or checks. However, for retailers that already accept debit cards, these alternative methods have little to no advantage. The providers will want to charge fees, the process for managing disputes is unproven, and all of the underlying accounts can (and do) have a Mastercard or Visa number attached to them.

More Credit Building

Credit building cards have been a frequent topic in CardsFTW and across fintech land. Last week, credit-building debit card startup Grow Credit announced a partnership with Dovly, a credit report dispute service. Both companies aim to boost a user’s credit score. Grow has started to announce a number of partnerships on their new API, Grow API, that embeds the Grow experience in another app instead of a direct consumer marketing approach.

Grow aims to build users’ credit by providing a small loan issued by either Blue Ridge Bank, N.A., or MRV Banks and a debit card issued by Sutton Bank. The user then pays for a small subscription like Netflix on the card and pays that back, generating positive credit behavior.

Dovly, on the other hand, works more like a traditional credit repair company, identifying potentially negative information on a report and providing a method for manual or automated disputes with the bureau. Your score will go up by disputing and removing negative information from your report. Between these two services, a user can improve their score and access new and better products.

Grow intends to announce additional partnerships like this and followed up the Dovly announcement with the announcement of a partnership with gaming debit card Ugami. I look forward to following these tie-ups and seeing how they help consumers.

Thank you for reading CardsFTW. This post is public, so feel free to share it.

Happy Holidays

Barring any major news, this will be the final issue of CardsFTW for the year. We hope you enjoy a happy, restful, and peaceful holiday season. See you in 2024!

CardsFTW

CardsFTW is a weekly newsletter, released most Wednesdays, that offers insights and analysis on new products in the credit and debit card industry for both consumers and providers. CardsFTW is authored and published by Matthew Goldman and Ellen Perl of Totavi, LLC. Totavi is a boutique consulting firm specializing in fintech. We bring real operational experience that varies from the earliest days of a startup to high-growth phases and public company leadership. Visit www.totavi.com to learn more.

*Indicates a company where Totavi, LLC has a business relationship.

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