PayPal Holdings Inc.’s Venmo said Monday that it was beginning the rollout of its credit card, betting that a mobile-oriented design and a rewards experience tailored to personalized spending habits will draw users to the offering in a crowded market for rewards credit cards.
The card lets users split payments more naturally and receive cash-back rewards directly into the Venmo app, which Venmo general manager Darrell Esch said was in keeping with the mobile and community focus of the popular peer-to-peer money-transfer service.
Venmo, which announced last October that it would be launching a credit card but didn’t detail all of the card’s features until now, said Monday that certain users will be able to apply for the card immediately if they have the newest version of Venmo’s app, with a wider launch planned over the coming months.
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While Venmo will be issuing cardholders physical cards, Esch said that the offering is centered on Venmo’s mobile app. Cardholders will be able to use the app to see and split transactions, track their spending habits and receive cash-back rewards.
“Venmo is an all-the-time, every-day app,” Esch argued. In his view, people may not check their credit-card or banking apps on a daily basis to see their card balances or transaction histories, so the act of situating the Venmo credit card into the peer-to-peer app that users already check regularly could drive “engagement and awareness” about spending patterns.
Ultimately, the Venmo card is “a big step forward” for PayPal as it aims to become a daily staple for more customers, said Esch, who sees room for Venmo to do more with financial management tools down the line.
The physical cards come with unique QR codes on them that are linked to a user’s Venmo account. When people use the physical card to pay for a group meal or ride, they will be able to show the QR code to the other parties, who can then scan it and pay for their portions of the purchase. Esch called this a “one-of-kind feature” on a credit card.
Venmo is offering up to 3% cash back on purchases in a user’s top monthly spending category, up to 2% cash back on purchases in a user’s second largest spending category and up to 1% cash back on all other purchases. The company will calculate users’ top spending categories at the end of every month so that the cash-back rewards for that month are maximized.
“I think customers are going to be surprised … that a credit-card program is doing the calculations for them and for their benefit every time,” Esch said.
Users will receive the rewards in their Venmo accounts and can apply the money to their credit-card balances, pay friends, make online purchases through retailers who accept Venmo or transfer the funds to linked bank accounts or debit cards.
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Venmo is offering cardholders a choice of five brightly colored designs for the card, which can be activated using the QR code on the front. Users will also have access to a virtual card and in the event they lose their cards, they can shop online with the virtual version while waiting for the physical replacement to come in the mail.
The Venmo cards will be issued by Synchrony Financial (SYF)
More than 60 million people used Venmo for a transaction in the 12 months from June, up from 52 million in the 12 months through December 2019, but PayPal (PYPL) is looking to generate more revenue from the service by better situating it within the general commercial landscape. The Venmo credit card represents an important element of that strategy, Esch told MarketWatch earlier this year.
A Venmo inflection point is “on the horizon” and “worth the wait,” Wolfe Research analyst Darrin Peller wrote in a September note to clients, calling out the Venmo credit card as one catalyst. He has an outperform rating and $225 price target on the stock.