PayPal to launch Venmo credit card in partnership with Synchrony

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PayPal Holdings Inc. plans to roll out a Venmo credit card next year as the online-payments giant looks for new ways to monetize the popular peer-to-peer money-transfer platform.

Synchrony Financial SYF, -0.59%  will serve as the issuer of the co-branded card that is expected out in the second half of 2020, the companies said in a Thursday release.

The market for credit cards is crowded, but PayPal PYPL, -0.48%  and Synchrony expect that consumers will see value and differentiation in their offering due to a focus on the back-end user interface. Venmo cardholders will be able to deal with all aspects of their cards from within the Venmo app, providing a “native in-app experience” for users who are used to checking that app on a routine basis, according to Synchrony Chief Executive Margaret Keane.

PayPal Senior Vice President of Credit Darrell Esch declined to reveal the distinct features of the card or app ahead of the official launch next year, though the company’s release said that cardholders “will receive real-time alerts and can interact in new ways including splitting and sharing purchases.” He told MarketWatch that while consumers might ordinarily migrate to a stand-alone credit-card app once a month to pay their bills, “Venmo users are far more active and engaged” inside the Venmo app, a characteristic PayPal hopes to leverage in the card rollout.

Venmo has been gradually evolving beyond peer-to-peer payments in recent years, including through a debit card that ties in users’ Venmo balances as well as a Pay With Venmo feature that lets consumers use Venmo for online purchases. Though Venmo doesn’t charge users to send money to friends, PayPal is able to generate revenue through these newer features on the back end.

PayPal disclosed on its latest earnings call that about 15 million Venmo users have engaged in a “monetizable” experience to date, and analysts see PayPal’s ability to make money off of Venmo as key to the stock’s outlook.

PayPal has a longstanding relationship with Synchrony and sold the financial services company its credit receivables portfolio last year.

While Venmo has a reputation for being a youthful platform, Synchrony’s Keane sees the Venmo user base as broader and expects it will “certainty fit the credit profile of what we lend on.”

PayPal shares have dropped 14% over the past three months, while Synchrony’s stock has lost 7%.