I just realized that PayPal acquired Venmo in 2013 (when it was already ongoing), and Square just launched CashApp in December, eight months ago, and CashApp passed Venmo in cumulative downloads by the end of July (33.5 million downloads to 32.9 million). That’s rather astounding, whatever else you may say about it, although I’m sure that the PayPal people will have rationalizations.
Best,
Saul
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That’s rather astounding, whatever else you may say about it, although I’m sure that the PayPal people will have rationalizations.
I don’t know what that even means, Saul! Venmo’s total payment volume grew 78% YOY last quarter. I think both are doing awesome and continue to believe that this is not a winner-takes-all scenario. Square is growing much faster than PayPal right now, but it is also valued at a much higher premium than PayPal. I am happy to be long both.
Matt
Long PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx
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FWIW, Square Cash was introduced in 2013 originally. Obviously they’ve added features since then and they’re growing like gangbusters now, but they’ve had a lot of time to learn and refine.
George
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I think both are doing awesome and continue to believe that this is not a winner-takes-all scenario. Square is growing much faster than PayPal right now, but it is also valued at a much higher premium than PayPal. I am happy to be long both.
Matt:
Why would you own both if both are doing well in the same industry sector? Seems one would be sold and moved elsewhere because owing both is NOT diversification. Look at a longer term chart comparison…PYPL has massively underperformed SQ.
Imo, own the best performers in any specific industry sector. But that is just my approach and not specific advice otherwise.
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FWIW, Square Cash was introduced in 2013 originally.
Sorry, I guess I misread Sramana Mitra’s article (entitled “Square Is On The Rise”), on SA today.
https://seekingalpha.com/article/4200340-square-rise?app=1
She said (bolding is mine):
It is already seeing strong adoption for its peer-to-peer cash transfer app CashApp, which was launched in December last year. CashApp is connected to a credit card and allows users to transfer funds to others using this credit card. It also added more services to the app by focusing on financial services for the underbanked. It allows users to store money in a virtual account and has given them a virtual routing and account number to receive direct deposits. It has also given them a debit card etc …
It turns out that CashApp has been around for merchants, in one form or another, since 2013, but it’s the peer-to-peer cash transfer which was recently released, and which caused all the adoption and downloads. Passing Venmo in eight months is still quite an achievement in my opinion.
Saul
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For peer-to-peer transfers, Venmo reigns supreme. Don’t believe me, read the app store reviews (sort by “newest”).
Square has vendor transactions nailed down. But individual users is a different game.
https://play.google.com/store/apps/details?id=com.venmo&…
https://play.google.com/store/apps/details?id=com.squareup.c…
🆁🅶🅱
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Duma and Matt
To be fair to both of you…
Duma - there was plenty of rationale for holding both previously - when Paypal was consumer aligned and Square was merchant aligned.
However…
Matt - now that Square has moved into the consumer segment and Paypal has moved into the merchant segment they completely overlap. There may not be room for both in the long run.
Paypal has its own currency and is allied with but boxed in by Visa and Mastercard
Square has greater merchant pulling power and is growing faster now with consumers too. It is coming from the outside but has the chance to disrupt its category in a way that Paypal probably doesn’t threaten now (unless cryptos are completely banned leaving Paypal with a rare alternative currency).
It could be time to have to decide.
Ant
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Hey Saul,
The Seeking Alpha writer is wrong. Cash App’s debit card was introduced in December 2017. Square Cash App P2P payments have been around since 2015. This is a blog post written on Square’s website from March 2015:
We introduced Square Cash in 2013 as the fastest, easiest way to pay anyone. All you needed was a phone number or email address, and a debit card. We launched the service for individuals, streamlining payments for everything from splitting the dinner bill to sharing vacation costs. And we’ve come a long way in a short time: we’re now processing over one billion dollars in peer-to-peer payments annualized.
From https://squareup.com/us/en/press/introducing-cashtags
I know you know this Saul, but to others, just remember to choose carefully who you follow/trust on Seeking Alpha. Some of the writers are terrific, like Bert, but others are careless and loose with their facts. More to say, but will leave this here and make a separate post…
Matt
Long PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx
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Square Cash App P2P payments have been around since 2015.
Ugh, meant to say they have been around since 2013, the beginning of SQ’s Cash app.
Sorry for the typo.
Matt
Long PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx
A recently graduate told me there was no one he knows at his private college that uses Cash App, but everyone uses Venmo. Additionally, he commented that Cash App is popular among minorities and folks without a bank account (which is a large group).
This is a sample size of one, but I read recently:
The No. 1 and No. 2 most popular merchants on the receiving end of Cash payments? McDonald’s and Walmart, which seems to indicate potential mass appeal — whereas Square’s previous consumer products seemed more targeted at early-adopter types.
https://www.recode.net/2018/2/27/17059182/square-cash-app-mo…
Do you think demographics will drive the growth of Venmo versus Cash App? Is Venmo for the early adopters too?
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Hey Duma,
Why would you own both if both are doing well in the same industry sector? Seems one would be sold and moved elsewhere because owing both is NOT diversification
You’re right, it’s not diversification. If I knew who the winner was going to be in any given sector, trust me, I would just invest in that company. But I have identified a few sectors, which I believe have massive secular tailwinds at their back, where I do not yet know which stock is going to be the “best” winner, but from which I am fairly certain there will be many winners. In these scenarios I like to select baskets of stocks. In the payments/fintech space, I own GPN, MA, PYPL, and SQ. Yes, SQ is the best performer of those, but all four are actually doing spectacularly well.
I think this strategy is fine. 30 years ago you would have done just fine to invest in Home Depot and Lowe’s. Ditto Pepsi and Coke. Ditto CVS and Walgreens at some point. Heck, ten years ago you would have done amazingly well investing in Mastercard and Visa. I think we’ll be able to look back ten years from now and say the same about PayPal and Square. Same sectors, different stocks, and picking a basket would have resulted in fine returns. Of course, I could be wrong about PayPal and Square, but I think the strategy is sound and it fits my style.
Ant,
There may not be room for both in the long run.
You’re definitely right, but I don’t believe the time is here when I have to decide yet. That time might be a few months from now or never happen, but that is why we must keep watching.
Finally, remember, we keep talking about Venmo as if that is all PayPal has to offer, and it’s almost like we’re forgetting its core platform which dwarfs both Venmo and Cash app and offers virtually all the services these do. About 250M active users and growing, and every quarter user engagement increases by double digit percentages too. Meanwhile Venmo is growing payment volume by 78% YOY, which is spectacularly fast too.
PayPal is growing revenue and EPS by about 25% YOY each quarter, all while its legacy eBay business is declining and about to go away, meaning the rest of the business is growing faster (the point Bert recently made about PayPal too). Its dominating mobile payments. In Q2, mobile payment volume grew to $54 billion, a 49% YOY increase, representing 39% of PayPal’s total payment volume.
And, of course, SQ is growing spectacularly too. So I choose both … for now. If/when the time comes, I will hopefully have the smarts to sell one and hold the other. Until then, I hold and watch. Just my thoughts…
Matt
Long GPN, MA, PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx
64 Likes
A recently graduate told me there was no one he knows at his private college that uses Cash App, but everyone uses Venmo.
This is from a year ago, but Venmo was taking over college campuses at the time.
It is no secret millennials are driving Venmo’s growth. Campus culture is littered with examples of Venmo’s popularity where the app’s nomenclature is increasingly being used as a verb as in, “I’ll venmo you the money when I get back to my dorm.” Student-written opinion pieces praise the service. College newspapers run feature articles on how the app is revolutionizing the way money is being spent on campus. Signs sporting Venmo user IDs have even been spotted on ESPN’s popular College GameDay show asking viewers for beer money donations.
From https://www.fool.com/investing/2017/03/22/why-venmo-is-so-po…
There are hyperlinks to all those examples in the article.
Matt
Long PYPL
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Venmo was taking over college campuses at the time.
Seen on Stephen Colbert recently: https://www.cbs.com/shows/the-late-show-with-stephen-colbert…
About 4:15 in, he hands some quarters to a Millennial and says:
Have you ever seen these before? They’re like Venmo you can touch.
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Another sample size of one, but my youngest son (age 32) says he and his friends all use Venmo. He had heard of Square, but didn’t know much about it and didn’t seem interested in exploring it.
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Venmo may be more commonly used, but does Square even want the business? I’ve only seen Venmo used to transfer cash balances between people or to pay contractors who presumably don’t want to pay all their taxes. It’s never something that generates fees. My wife and her co-workers use it to pay each other back for lunch when one person uses a credit card. I think they each have a credit of about $100 and the balances just keep getting passed around. I guess at some point someone loads money from a bank account but I don’t think that generates fees either.
If Square Cash is meant more for paying merchants, at least they can use that data to enhance their services to those merchants.
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IRdoc, that’s exactly how my son described using it, and I am sure it didn’t generate any fees because he wouldn’t use it if it did.
I’ve only seen Venmo used to transfer cash balances between people or to pay contractors who presumably don’t want to pay all their taxes. It’s never something that generates fees.
That’s a great point IRdoc. Venmo has historically not generated fees, as it has primarily been a P2P platform. That being said, PayPal began talking about monetizing the platform last year, saying it wanted to do it slowly and deliberately, and is now rolling these features out – namely a debit card and a the Pay with Venmo feature. The debit card is fairly self-explanatory, the Pay with Venmo app allows users to make purchases with Venmo. The great thing about Pay with Venmo is that the 2M merchants who already accept PayPal can be given the capability to accept Venmo with no effort on their part.
Even while these features are fairly brand new, management said 17% of users had already participated in a monetized activity on the platform during the Q2 conference call.
So this is a revenue stream still in its infancy with the potential to boost PayPal’s growth in the years to come.
More on Pay with Venmo: https://www.fool.com/investing/2017/11/14/venmo-me-paypal-ta…
More on Venmo debit card: https://www.fool.com/investing/2018/06/26/paypal-goes-head-t…
Matt
Long PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx
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I don’t know much about Venmo, but it seems to me that SQ is the only one that doesn’t require the customer to own a smart phone or computer. Is that correct?
You are happy to own both PYPL and SQ.
What is your relative conviction for each at this point? more towards the ‘value’ or more towards the growth?