Summary:

Venmo first popped up two years as an emerging mobile payment start-up, helping users pay each other through text messages. Now, after two years of testing and tinkering, the once private beta service is open to the public though it faces a lot more competition now.

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Venmo first popped up two years ago as an emerging mobile payment startup, helping users pay each other through text messages that tapped Venmo accounts. Now after two years of testing and tinkering, the private beta service is open to the public amid a lot more competition now.

Built as a simple way for friends to not only share payments but experiences, the service has evolved from its roots in SMS. Now users access Venmo through mobile applications for iOS, Android and the Web. The service allows users to pay each other for free when paying out of their existing Venmo balance or when they fund payments from their bank account. Users can make their first $500 worth of credit card-funded payments without a fee before they are charged 3 percent on those transactions.

The company is processing about $10 million in payments a month now and hopes to handle $250 million by the end of the year. The plan is to expand payments beyond person-to-person and into small businesses.

Venmo jumps into an increasingly crowded field. PayPal, which is ramping up its mobile payment business, processed $4 billion in mobile payments last year and just announced a mobile payment service for small businesses called PayPal Here. Meanwhile, credit card companies like American Express and Visa are rolling out their own mobile wallet services. And start-ups like Square and Dwolla have launched quality services that can also facilitate person to person payments.

Venmo is trying to leverage its social roots. The service started out as a quasi-private social network built around a user’s phone contacts. Venmo still wants to emphasize the social side of payments and encourages people to make their purchases public. Users are able to connect through Facebook and see who they’ve paid and on what occasions. Here’s what the company wrote in a blog post:

For us, the most exciting part of creating Venmo is seeing other people use the product the way we do — not simply as a payment service but as a  way of expressing, capturing and sharing all of the fun things friends  do together. We have been thrilled to see that our users love sharing  payment notes with friends, leaving comments, and browsing through their payment histories to relive time spent with friends. With Venmo, every  payment tells a story of friendship and shared memories.

The Philadelphia-based company, which was started by former college roommates Andrew Kortina and Iqram Magdon-Ismai,  is funded by Accel, RRE, Greycroft, and Lerer Ventures and is now up to more than 23 employees.

It’s too bad that Venmo took so long to get up to speed. Launching earlier with a public product could have helped it get more attention. But now it faces a tougher time getting noticed in a crowded market.

And the challengers aren’t just in mobile payments. American Express and PayPal have also launched initiatives that make it easy for friends to pay each other through Facebook. There’s still an opportunity in mobile because no one has become dominant in the emerging mobile payment space. But with big brand names now really trying to own mobile and social, it’s going to be hard for Venmo to become a popular choice as a payment tool.

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