How Venmo's teen account is meant to hook adults

Mobile phone with Venmo app open
Venmo is adding access to teens ages 13 to 17.
Andrew Harrer/Bloomberg

As payment apps expand, capturing the next generation becomes a vital way to build habits among young people while also gaining ground among older users.  

Venmo, a peer-to-peer (P2P) app long popular with young adults, this week announced the "Venmo teen account," which enables parents and legal guardians to open an account for 13- to 17-year-olds. This enables the PayPal unit to broaden relationships with families whose Venmo users are now parents of teens. 

There's also an opportunity to reach older consumers who may not use P2P apps but can be drawn into the market — or kept there — through their kids. 

"I have college kids who tell me to use Venmo or recommend it," said Aaron Press, research director for IDC Insights, who focuses on international payments. 

The Venmo teen account, which will launch in June, includes a debit card and educational content focusing on healthy financial habits. The teen accounts are connected to and managed by a parent's personal Venmo account, meaning each teen account guarantees at least two Venmo enrollments from the same household. 

Parents have control over settings, and can view the teen's transactions and monitor the friends lists that are part of Venmo's social component. The teen account has a separate balance from the parent's personal Venmo account, and the teen can also track their own transactions and receive direct deposits. ATM withdrawals are limited to $400 each day, and non-network ATMs carry a $2.50 fee. Venmo's no-fee ATM networks include Mastercard, Pulse, Cirrus and MoneyPass. There are no other fees for Venmo's teen account. 

For Venmo, which did not provide comment for this article, the teen account is a chance to assert more control over how young people use the app. Some parents were already setting up Venmo accounts for their kids in violation of Venmo's terms of service. Venmo is additionally in competition with Block, which more than two years ago enabled access to Cash App for 13- to 17-year-olds. The bank-supported Zelle also has educational materials for young people and access to transfers via Zelle's financial institutions. Other consumer apps such as Uber are also extending access to teens as a way to gain users as soon as they are old enough to enroll.

"If you can get a 15-year-old to get Venmo on their phone, they are less likely to use other apps later on," said Daniel Keyes, a senior analyst in Javelin Strategy & Research's merchant services practice. "And for a parent with two teens, there's the parent's Venmo account plus two teen accounts that they are accessing for transactions or monitoring."

Since P2P apps can be used to enroll consumers to cross-sell other financial products, the firms are trying to encourage users to build payment habits at an early age. Cash App supports Block's consumer and merchant clients, with products including payments, merchant services and crypto trading. Venmo is also a springboard for crypto payments and can extend merchant relationships through partnerships with Amazon and other retailers. While teens would likely not be investing in crypto or making frequent e-commerce purchases, there is a value in keeping their parents within Venmo's ecosystem. 

"All payments are essentially tools, rather than instant products," said Gareth Lodge, a senior analyst for global payments at Celent. "While there are lots of payment choices, we typically choose the same payment method over and over again. How often have you changed how you pay your bills, for example? This is likely to drive long-term adoption by getting to the consumers of the future ahead of other forms of payment."

P2P apps are widely used. Nearly 60% of millennials and Generation Z consumers have used a P2P app in the past year, according to research from Arizent, American Banker's publisher. Arizent's research also found that Generation Z and millennials are becoming more familiar with payment brands, including P2P apps such as PayPal, PayPal's Venmo or Block's Cash App — or the bank-supported Zelle — than with traditional banking brands.

"Banks have been working on mobile apps for a while, but Cash App and Venmo are almost exclusively mobile," Keyes said. 

That creates an opportunity for two-way word-of-mouth. Even though teen payment apps are geared toward reaching a new generation, younger people often make their parents or grandparents aware of new payment options. 

"Venmo is seeing a meaningful user base at both the older and younger end of the spectrum," Press said. "Parents who use Venmo often do so because their teen or college age kids encourage them to do so. So it makes sense to leverage these demographics to drive incremental use." 

Forty-two percent of Generation Z banked adults seek financial advice from friends, family and acquaintances, according to Ariana-Michele Moore, an advisor for retail banking and payments at Aite-Novarica Group, adding this sentiment likely flows to those who aren't quite yet adults.

"This is Venmo's way of offering a competing product, similar to the teen debit card account already offered by some banks, that will also service a particular P2P payment consumer segment with a value-add service,"  Moore said. 

Venmo's release also heavily focuses on education and privacy. The Venmo teen account's privacy settings, including the payments and friends lists, are set to private by default. 

While financial literacy is a large part of the pitch for all of these products, it is more of a value-add than a core product, according Press.

"The Venmo offering is unique in that it is not visibly tied to a specific bank but still links to [an adult Venmo account] that parents already have," Press said. "The competition is for usage, not to be the primary source of financial education."

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