How Will Lingering Security Concerns Affect Venmo’s Growth?
by Boot Bullwinkle
by Boot Bullwinkle
With the growing popularity of peer-to-peer (P2P) mobile payments, it’s never been easier to split tabs, pay bills and buy services like babysitting and yard work. A mix of efficiency, convenience and social networking have contributed to a rapid expansion in mobile P2P services and transactions.
Venmo is the clear front-runner to beat in the P2P payment space in a field that includes services like Zelle, Square Cash, Apple Pay, Facebook and Snapchat. But in their very early stages and rapid growth, Venmo struggled to keep up with the various laws and financial regulations designed to protect customers from fraud and money laundering.
At first, Venmo didn’t require two-factor authentication. Accounts were accessed by malicious users, people were misled into paying scammers, stolen information was used to max out’ credit cards — these are just a few stories that offer a window into the security issues Venmo faced throughout its rapid growth. Consumers were already apprehensive of using mobile payment technology due to security concerns, and these stories only exacerbated the feeling of distrust in the P2P payment space.
After being acquired by PayPal in 2013, Venmo was forced to grow up. They now have a fraud detection system that screens first-time transactions by looking for mutual friends between the sender and recipient, monitors captions for criminal activity, requires a two-factor authentication login system and incorporates PayPal’s robust compliance system. Despite these steps, older generations are still skeptical of P2P security, limiting the industry’s potential for growth.
Mobile P2P users tend to skew younger — much younger. A report from Verto Analytics shows 74% of Venmo’s users are below the age of 35 and half of those who use Square Cash, another P2P competitor, are between the ages of 25 and 34.
New data from Navy Federal Credit Union shows that security concerns are a significant reason for this generational divide. Just over half (50.1%) of 45–64 year-olds who don’t use mobile P2P services cited security concerns as a barrier to adoption.
Those concerns aren’t entirely unfounded given the examples above, and, as we learned with Equifax and the countless other instances of cyberattacks and financial fraud that happen every day, consumers always have to be extremely vigilant with their finances.
But as far as security goes, P2P payment technology is just as safe as traditional banks, perhaps even safer. With data encryption, sandbox architecture in mobile apps, dedicated security teams and an improved fraud detection system, these apps are doing all that they can to maximize and improve security.
These protections have been in place for years, and it’s clear that lingering perceptions of an older generation of Venmo prevent older generations from trusting the security of P2P payment services. But instead of fighting to win the trust of older generations, Venmo should keep focusing on the age group where they do best: millennials.
If Venmo wants to appeal to older audiences, they may have to make sacrifices along the way to compete with Samsung, Apple, Facebook and Zelle — the latter of which is perhaps the biggest competitor due to its direct partnership with financial institutions (and brings the perceptions of higher security along with it). However, unlike Zelle, which only works with participating banks, Venmo works across any app and has instant transfer features with all Visa and Mastercard debit cards.
Instead of trying to compete with banks and Silicon Valley giants, Venmo has stayed the smart course of not messing with a good thing (looking at you, Snapchat). Instead of implementing and removing features to appeal to older generations, Venmo has doubled down on its appeal to younger people who, of course, don’t stay young forever.
Millennials have grown up (they are now 22 to 37 years old), and Gen-Z isn’t too far behind. Positive interactions and experiences with Venmo are essential because that will build trust that might lead them to using the app to make more significant purchases.
Ultimately, Venmo doesn’t have to say goodbye to older generations all together, they just shouldn’t do anything that will sacrifice their core user base. A little bit of patience will go a long way — as their users grow up, so will they.
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