Over the last four years, the college generation has been able to watch a revolutionary new idea boom with success. Never again do we need to carry cash around or worry about missing that $10 our friend owes us. We’ve all known that our phones will continue to improve and become more and more of a part of our lives, especially when it comes to money. Banks have taken advantage of the application platform for years, but transferring money from one person to another was never an easy task.

This is where Venmo came in. The app was introduced in 2009 with strict abilities of wire transferring. These transfers were held to the same standards as other bank transactions were. The transfers were slow (1-3 business days), and complications within the transfer were common. It wasn’t until 2018 that Venmo was able to introduce the instant transfer – a game-changer.

Venmo has made the conventional wallet unnecessary. The app combines the financial aspects of a bank with the communication aspects of a social site. Users can safely transfer any amount of funds from their Venmo balance (linked to their bank account) to any other user of Venmo. This service is backed by security, and Venmo provides customer service for transactions.

So, where does Venmo make a profit? Transfers of money from one user to another come at no cost. This also applies to transfers to your bank. This is where Venmo got clever. After being bought by PayPal in 2013, Venmo took year after year of net losses. During this time the application saw staggering growth. Between 2013 and 2016, Venmo saw an increase in transaction value of over $3 billion.

Venmo had little streams of profit during this period. Users had the option to transfer funds instantly to their bank accounts at a small fee, but Venmo still offered a free option for a slower transfer. Unlike a bank, Venmo never fully held any of the funds in people’s accounts. Thus, they had a major disadvantage. Most financial services either charge flat rates or are able to provide other services with the money they hold. Venmo is different. It is the middleman between the bank and its users.

After years of building a name within the app store, Venmo was finally able to launch the Venmo Card; a physical debit card authorized by MasterCard that allowed users to purchase items with their Venmo balance. What was once a simple app for transferring money, has now evolved into a fully serviceable account provider.

It is the Venmo Card that has made the company profitable since its debut. By charging a three percent fee to the merchant, users will never see serviceable fees affect their accounts. Merchants rejecting the acceptance of the card lose access to an extremely desirable consumer segment – generation X. Holding that plastic card is what keeps Venmo at its roots: providing a free, instantaneous way of using one’s money.

Now handling over $12 billion in transactions per year, Venmo has transitioned into the new generation of banking. Providing users with descriptions and profiles, Venmo has included areas of personalization that favor younger generations.

With other companies like CashApp, Zelle, and Square trying to compete, the peer-to-peer payment space is filling with companies trying to be the leading edge, and that leading edge often involves security. This is where Venmo will need to spend most of its profits in the coming years in order to fulfill the full goal that made Venmo so popular in the first place.

Expansion can see Venmo continue to grow its social connection. Using the platform’s social feed as a form of marketing, Venmo is rumored to be expanding with promotional deals and discounts exclusive to cardholders and users. This planning and execution exemplify a company that understands its potential.