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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The new app allows a user to send a personal payment for free as long as its tied to a PayPal balance or a bank account. If users fund the payment through a credit card, it costs 2.9 percent plus 30 cents and the payer, or sender, pays. Payments overseas incur a fee of up to a few percentage points depending on whether it utilizes a credit card.

This is, in some ways, just a simple onramp for PayPal to get people to send money through Facebook. Instead of getting people to go through PayPal, they can just initiate payments in the place where people spend a lot of their free time. But again, it’s just an onramp. Payments ultimately have to be completed by signing on to PayPal. You also have to enter in a user’s email address because payments are tied to an email. Still, it’s an obvious move to tap the 800 million members of Facebook. And if it can get people to load up their PayPal balances more, it can mean extra income from interest on those funds.

But it’s not just about exchanging money. The Send Money app tries to be social by allowing users to send an e-card with a message that can include a picture or YouTube video. Or users can just send money directly. Either way, the app will post a note on the recipient’s wall that they’ve received a payment, though any message or amount of money paid is kept private.

The idea is that a lot of people send e-cards; 500 million each year according to PayPal. Now you can throw in some cash with that. For a lot of occasions, I’m not sure I want to send straight up money. That seems even less sentimental or meaningful than just sending a gift card. But I can imagine this is better for paying people back for things. And it shows that PayPal is intent on being everywhere that people are. It’s trying hard to extend its payment infrastructure into offline stores too. The bottom line is PayPal is going where the action is and it’s not just online or mobile, it’s social and local.

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