Written by Brooke Williams
From Zelle to Venmo, and everything in between, digital payment platforms have been gaining popularity since the mid 2010s. Then, the COVID-19 pandemic hit which led to another major increase in the popularity coupled with new developments in e-commerce due to the need for more online orders while social distancing. The reliance on these online payment platforms had even led to an increase in profits for companies Amazon and Walmart who collectively earned a 56 percent increase in profits in 2020 compared to 2019 in the United States (Bandura & Ramanujam, 2021). This increase in profits alludes to the fact that there must be some added convenience when paying online. Additionally, these developing online payment technologies have even been found to increase a consumer’s willingness to pay in some scenarios (Kiernan, 2021). Due to the increase in profits that can result from a company’s use of digital payment platforms and the increase in the willingness to pay that consumers have when using them it can be argued that apps such as Venmo, a digital payment app based solely in the United States, have
the ability to help domestic economic growth.
The gist of it is that consumers download apps such as Venmo because it makes paying easier by being able to pay for goods with just the tap of a few buttons. Additionally, consumers may know other people on these apps which makes Venmo’s other feature–paying back your friends–more convenient to them. Not only do digital payment platforms make paying for goods and commodities easier, but it also makes paying friends back easier which are two major advantages when holding a payment platform on your phone. These features combined help make using these apps more convenient and in turn can possibly lead to consumers being able to buy more than they could not before because of its accessibility. If consumers are able to access more goods, they will contribute larger amounts to measures of economic growth, such as GDP signaling Venmo’s significance in developing the larger U.S. economy. This can lead to economic growth as mentioned above and is an important thing to look into when looking at economic growth in the United States.
The current usage of digital payment platforms in the United States varies by
demographics such as age, race, and socioeconomic status, but without even considering these demographics, over half of adults in the United States have some form of online payment platform (Anderson, 2022). While the majority of adults in the U.S. stick to PayPal, Venmo is popular among younger generations and is now available in some stores in the United States (Anderson, 2022). However, the older generations are an untapped market when it comes to Venmo users. This is mainly because consumers 50 years or older are either not interested in these digital payment platforms or do not trust them with their money (Anderson, 2022). Since it has been found that there is an increase in willingness to pay with consumers while using Venmo, this means more is being bought and consumed when paying with these apps as compared to physical methods of payment such as a credit or debit card (Kiernan, 2021). If this app has more users, there can be more economic growth because of the possible increase in consumption. It is possible that marketing this app to older generations by proving their concerns incorrect and showcasing the app’s convenience could help lead to economic growth and this should be something looked into when finding methods to grow the economy.
Circling back to the aforementioned increase in willingness to pay because of these digital payment platforms, a study done by Amherst College found that consumers were more willing to pay for low-cost consumer goods with Venmo than any other physical payment such as a debit or credit card (Kiernan, 2021). There have not been many studies done on the impact of Venmo despite its popularity among residents of the United States but in this study it is found that college students view spending money on Venmo as “fake” and this causes them to spend more money (Anderson, 2022). This could be because of a psychological disconnect with the app making the money less tangible and have it appear as less real. Whatever the reason, more money is being circulated through the economy which is leading to more economic growth driven by college students and other younger consumers using Venmo due to the increase in consumers’ consumption.
Some may mention issues that arise with this idea that Venmo can lead to economic growth such as the claim that Venmo does not cause consumers to spend more money or that older generations will never become users of the app. However, these claims are not necessarily true. Venmo is revolutionizing consumer spending just like credit cards did in the 1980s (Kiernan, 2021). Aside from the fact that consumer spending is increasing because the money in their accounts is not fully tangible to them, Venmo also doubles as a social media where the user can see other transactions which causes them to also want to spend more money (Kiernan, 2021). With this knowledge it can be concluded that consumers are more willing to pay through Venmo than any other form of payment. As for the older generations, a lack of interest is often the cause cited as to why they are not users of Venmo and other digital payment apps (Anderson, 2022). I believe though that this interest could be changed if these generations were just made more aware of the convenience of the app as another major reason for the low usage is the lack of knowledge on the app (Anderson, 2022). Venmo clearly can help contribute to an increase in consumer spending and while issues may arise with this idea the foundation is there to increase domestic economic growth.
It is clear that digital payment platforms have had a rise in popularity over the past decade. From using it to pay back friends to using it to pay for goods, many consumers have used these platforms as their new dominant way of paying due to its convenience. In addition, not only is Venmo being used to pay for goods, it is being used to pay for goods more frequently than other physical methods of payment which is leading to more economic growth. Venmo and other digital payment platforms can be the key to unlocking more economic growth in the United States, but there are still some key components missing before this happens. First, Venmo must be used more by older generations because currently undergraduates in college are the main users. It must also make sure it is being marketed as trustworthy because this could open up new markets such as older generations which can contribute to economic growth. Overall, Venmo and other digital payment platforms have been helpful in increasing consumer spending simply due to its convenience. These platforms can be the key to more economic growth and there should be more studies done to help contribute to this idea to really research if this could have a positive outlook for the United States.
Works Cited:
Anderson, M. (2022, September 8). Payment apps like Venmo and cash app bring convenience – and security concerns – to some users. Pew Research Center.
https://www.pewresearch.org/short-reads/2022/09/08/payment-apps-like-venmo-and-cash-app-bring-convenience-and-security-concerns-to-some-users/
Bandura, R., & Ramanujam, S. R. (2021). Developing inclusive digital payment systems. Center for Strategic and International Studies, 21.
Kiernan, E. (2021). The Venmo Effect: The Impact of Digital Payment Platforms on Consumer Willingness to Pay. Amherst College.
https://www.amherst.edu/system/files/media/Emily%2520Kiernan%2520Thesis%2520April%25202
021.pdf
Photo by Anna Shvets from Pexels: https://www.pexels.com/photo/person-holding-bank-card-4482900/