I, like many twenty-somethings, use Venmo to make or receive payments on a regular basis. What this mostly means is that I share joint custody of the same $20 that gets passed back and forth between 3 or 4 people. Cotter got pizza this time, I’ll get it next time, but not before I owe John for the beers we’ll drink on the patio soon.

It’s worthwhile to consider what this $20 ultimately means—to me, to my trusted Venmo consortium, and to the company itself.

$20 in my Venmo account isn’t anything more than a promise. At this point, a Venmo balance does not have transactional value outside of situations such as my friends paying each other back. I can’t pay for coffee at my local coffee shop through my Venmo account, and the company cannot hand me a physical $20 bill. Instead, my $20 Venmo balance represents a promise that the company owes me the equivalent value of $20 which can only be redeemed when the burden of this promise is shifted from Venmo to my bank at my request. A balance in a bank account represents a similar promise, but with the support of institutions like the US Treasury and Federal Reserve, it has a bit more utility. I can claim a $20 bill from my bank or use the balance to purchase goods through a debit card. 

From a certain view, even though a Venmo balance is one step removed from being “real” money, it’s close enough that most people won’t care. This is how many bank leaders I worked with during my days as an auditor viewed it. They were nervous that as this platform grew and the ability to pay merchants directly was eventually developed, many young people would begin to keep all or most of their money in a Venmo account rather than a traditional checking or savings account, perhaps going so far as to have paychecks directly deposited into their Venmo account (which is technically a service Venmo offers). Banks make money by accepting deposits from people and businesses and then using that money to create loans, which they can then collect interest on over time. The prospect of losing their main funding source for loans is a serious threat. 

These fears are mostly unfounded—Venmo’s goal is not to replace financial institutions. Instead, the company has been working to build a large network of consumers that are accustomed to the convenience of transferring money among peers with the ultimate goal of selling a version of the app to businesses that would allow customers to pay for things like coffee, food, groceries, etc. with their Venmo account. Because of Venmo’s social feature, which would show your friends that you made a purchase at a particular coffee shop, businesses would get the benefit of a built-in marketing tool along with a convenient point-of-sale machine. Venmo doesn’t incentivize maintaining a large balance or even making high-dollar transfers through the app. As long as a lot of people are used to making a lot of transactions, their strategy is working.

All currency requires the suspension of disbelief that its value is inherent and objective and not completely made up. Even with something like the gold-standard, where all money in existence is backed-up by something physical, value is still theoretical. $20 in a bank only means what it does because we’ve built institutions and systems to support and protect the idea that $20 means $20 and any inflation or deflation is gradual and therefore manageable. 

Currency and value, Venmo or otherwise, is abstract despite layers upon layers of thinking and institutional support to make it appear fixed and concrete. It’s subjectivity meant to appear objective; an attempt to play God—humankind’s sneakiest Tower of Babel. Regardless, I think it’s funny that mine and my friends’ small pizza and beer economy is enough to make its protectors sweat.

3 Comments

  1. Geneva Langeland

    Thanks to a quirk of my off-brand cellphone carrier (Republic Wireless), Venmo doesn’t work on my phone. You’re welcome, bankers!

    Reply
  2. Avatar

    I think it’s even funnier that the small pizza and beer economy making those protectors sweat is modulated by an emoji-based communication system. There’s probably some sort of metaphor there. Great stuff, Jordan!

    Reply
  3. Kyric Koning

    This old man with his old man phone be like, “What’s Venmo?” Hah. Digging through the layers of this post was work. Fun, but work.

    Really shows you how important belief is, though–to add but another layer…

    Reply

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