Please ensure Javascript is enabled for purposes of website accessibility

The Gap Between Cash App and Venmo Is Getting Bigger

By Adam Levy - Aug 27, 2019 at 1:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Cash App is becoming a major source of revenue for Square.

More people are downloading Square's (SQ 8.52%) Cash App than ever before. The peer-to-peer payments app hit a new record for monthly downloads in July, according to Instinet analyst Dan Dolev. Importantly, Square is consistently seeing more downloads per month than PayPal's (PYPL 5.96%) Venmo, which popularized mobile peer-to-peer payments.

While Venmo got a head start over Cash App, Square has quickly caught up and surpassed the payments pioneer in downloads earlier this year, according to Dolev. It's done so by introducing new features to Cash App in its quest to provide more services for the underbanked. Eventually, Square thinks Cash App could do just about everything a traditional bank does for most people.

Not only are consumers attracted to Cash App's broader set of features, but they've become a significant source of revenue for Square. PayPal investors have hoped Venmo would become a similar source of valuable revenue, but its progress is well behind Square's and likely to keep falling behind as Cash App becomes increasingly more popular than Venmo.

A person holding a phone displaying Cash App.

Image source: Square.

How much revenue are we talking about?

Square made its first ever Cash App revenue disclosure in its second-quarter letter to shareholders. Management said the app brought in $135 million in revenue, excluding bitcoin sales (of which it takes a minimal spread). That puts it on a $540 million run rate.

PayPal management said Venmo was on a $300 million run rate as of the end of the first quarter, but declined to update that figure during its Q2 earnings call. The lack of an update may indicate growth is slowing for Venmo, since management did provide an update ($200 million run rate) in the fourth quarter.

Investors should expect the revenue gap between Cash App and Venmo to increase, but management isn't dedicated to providing quarterly updates.

What's the big deal?

Revenue from the peer-to-peer payments apps is a much bigger deal for Square than it is for PayPal. Cash App's $135 million second-quarter sales was more than half the company's subscription and services-based revenue. It's also about 13% of the company's total revenue excluding bitcoin sales. The $75 million Venmo generated in the first quarter represents less than 2% of PayPal's sales that quarter. 

Importantly, much of Venmo's revenue will come from cannibalizing its flagship product, not that that's necessarily a bad thing. Cash App, in contrast, actually has an ecosystem effect on Square's other products, boosting the company's overall revenue.


While Venmo and Cash App both started with the same basic functionality of peer-to-peer payments on smartphones, the long-term monetization plans for both are very different. Square is focused on financial services, particularly for the underbanked. That includes things like payment cards (Cash Card), personal loans, and investing (albeit only with bitcoin for now). While PayPal's management has mentioned similar interests for Venmo, the long-term opportunity is for it to support payments from consumers to businesses, much like its flagship product.

As a result, it's likely both apps will continue to coexist on consumers' phones. But Square's success so far significantly curtails PayPal's ability to diversify away from its core competencies, as consumers have strongly voted for Cash App with their app store download history.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Block, Inc. Stock Quote
Block, Inc.
$90.52 (8.52%) $7.11
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
$85.21 (5.96%) $4.79

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.