PayPal Holdings Inc.’s Venmo brand is adding cash-back rewards for users of its debit card in a further bid to entice users to try the Venmo service for things other than sending money to friends.
Venmo rolled out a debit card last year as part of PayPal’s efforts to start generating more substantial revenue from the peer-to-peer payment service. While it’s free for users to send money to friends through Venmo or spend their funds through the associated debit card, PayPal is able to make money on the back end of the debit-card transactions by participating in the traditional economics of card swipes and dips.
By offering cash-back rewards at select merchants, Venmo is following in the footsteps of Square Inc. , which began allowing this capability last year for those who use its Cash debit card. One popular Square Boost offer is the ability to get a dollar off coffee purchases made with the card.
The Venmo Rewards program features “limited-time offers” including 5% cash back at Target Corp. , Chevron Corp. and Papa John’s International Inc. . The company plans to add new offers as the existing ones expire. Users who make qualifying purchases through the program will receive the cash back in their Venmo accounts and will have the option to share their savings with friends.
PayPal disclosed on its last earnings report that it ended the third quarter with Venmo at an annual run rate of almost $400 million. It said Venmo boasts a “highly-engaged 40 million-plus users in the U.S.”
Shares of PayPal have gained 27% so far this year, as the S&P 500 has risen 21%.