The news: PayPal announced that Amazon will add Venmo as a payment option on its website and mobile app for US customers beginning in 2022, speeding up the peer-to-peer (P2P) payment service’s evolution into a significant ecommerce player.

• The news came late Monday as PayPal posted 13% revenue growth in Q3 compared with last year.
• PayPal cited an internal study that indicated 65% of Venmo users increased their digital spending during the pandemic, while 47% showed interest in paying merchants using Venmo.

The future of Venmo: “This is obviously a very significant moment in our Venmo monetization efforts and marks the beginning of an exciting journey with Amazon,” said Dan Schulman, president and CEO of PayPal, during an earnings call.

• Schulman cited “contractual obligations of the eBay operating agreement” as the reason why the move didn’t happen earlier.
• Freedom from the eBay restrictions, he added, opens PayPal up to “working with a number of marketplaces,” suggesting that similar initiatives could be forthcoming.

Schulman stated that Venmo is projected to generate $900 million in revenues this year, with more than 80 million customers. While Venmo expects to expand its P2P activity at “very healthy rates,” the Amazon tie-up represents a shift toward ecommerce. Schulman admitted as much, saying Pay with Venmo would be one of Venmo's key revenue drivers.

PayPal itself is not a payment option on Amazon, so having Venmo available should help the parent company’s bottom line.

Analyst take: “Amazon has forever not wanted to open up its ecosystem to accept other buy buttons or give them any real estate on its platform. Obviously now it is, first with Affirm and then with Venmo,” said Jaime Toplin, senior analyst at Insider Intelligence.

The big takeaway: The Venmo news is unlikely to sway longtime Amazon users into buying more, considering credit card transactions serve most of them just fine.

• In addition to credit cards, the ecommerce giant accepts debit cards, credit card points, and checking accounts; business users can also pay by invoice or line of credit.
• As Amazon matures and its growth slows, alternate payment methods could be a means to secure incremental revenues.
• Venmo is particularly popular with Gen Z; this move could help attract younger consumers who tend to be unbanked and eschew credit cards.

For more information on what’s next for PayPal and Venmo, read this article from our Payments & Commerce Briefing.