Venmo, which moved from Philadelphia to New York, first appeared on the scene two years ago with a peer-to-peer payment system that worked via SMS. It finally put the whole package together in March, when it came out of beta and opened to the public, enabling people to send payments through iOS and Android apps and over the web. The company said at the time it was processing $10 million in payments a month and was hoping to to get to $250 million by the end of the year.

Now with Venmo in the fold, Chicago-based Braintree gets another way to build up its mobile payments business and also compete with new rivals like Stripe. The move also gives Braintree a consumer-facing business, instead of the B2B work it was doing supporting more than 2,000 companies.

Braintree is currently doing more than $4 billion annually in processing volume thanks to big-name clients like Rovio, Uber, Fab.com and Airbnb. Most of that businesses was online but Braintree said about $1 billion of that was in mobile, which was growing much faster than its online commerce business.

With more and more commerce moving to mobile, Braintree is in a better position to take its share of that business. It will still continue to push hard on mobile commerce but with Venmo, it also has a way to profit from peer-to-peer payments. That’s a crowded field, though. Companies like PayPal have been enabling P2P payments for years and other big names like American Express and Visa along with smaller startups like Square and Dwolla are also in the same space. I think Venmo may have been able to make a better go of it by itself if it had launched to the public earlier. Now, it faces a lot of competition and it’s probably best that it is being folded into a player like Braintree.

The purchase of Venmo will likely signal more consolidation to come in the mobile payment space. I expect we’ll see not just payment companies come together but startups all across the payment, loyalty, offers and local commerce market get rolled up over time. The deal also highlights the growing opportunities in mobile payments. As more and more people turn to their phone to pay for things, there’s a lot of money to be made.

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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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Kortina is well aware that many people have tried peer-to-peer mobile payments, and that more powerful companies are trying to do so today (PayPal fits in both categories). Amazon, for example, bought a very similar Y Combinator startup called TextPayMe, and offers its functionality as an (albeit buried) Amazon-branded service today. “We have the audacity to redo it even though it’s been done many times. We think we can do it better,” said Kortina.

Where Venmo aims to win is by using social connections between friends. When you sign up you connect to Facebook and Twitter to broadcast payments (only the ones you choose) and look for other Venmo users among your email contacts. Then you send your Venmo contacts payments by texting Venmo something like “pay Sally $6 for the yummy burrito.” You can also declare a contact “trusted,” and allow them to directly pull from your Venmo account (which in turn pulls from your credit card or bank account) without your confirmation. Or you can Venmo someone $3 with the message “grab me a coffee” when you know they’re on their way over to your office.

Philadelphia-based Venmo, right now a three-person shop from Kortina and two of his former classmates from the University of Pennsylvania, pays a small fee on every credit card transaction and plans to make money by passing that on to merchants. Kortina said they intend the service to always be free for friends. One issue with this plan is Venmo designing itself for the casual spectrum of transactions. If you happen to be buying something at a store that has a point of sale system, you’ll just hand over your credit card.

Of course, the other big issue with Venmo is the privacy and security of tying payments directly to your phone number. Kortina said Venmo will allow a high level of user control over every transaction, therefore protecting users.

I’m sure it’s going to be more complicated than that, but I think Kortina may be right about mobile payments coming into their own. For instance, after the major earthquake in Haiti earlier this year, people donated more than $35 million through $5 and $10 text messages, according to the Mobile Giving Foundation (this was through a slightly different method of adding the payments onto users’ cell phone bills). And there’s also plenty of smart people working on the mobile payments problem — for example Twitter founder Jack Dorsey’s Square, which is targeting merchants with a point-of-sale hardware dongle.

Venmo today is available only by invitation from someone who’s already on the service, and Kortina said he expects it to be that way for a while. If you’d like to get in line for an invite, Kortina said to follow @Venmo on Twitter. (If you’re really nice to me, maybe I’ll let you send me some money. Just kidding.)

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