PayPal, Venmo, and Zelle: What Americans Want Out of Digital Payment Apps
KEY POINTS
- TRUST EQUALS POPULARITY: Three-quarters of respondents trust digital payment apps as much as traditional payment methods.
- PREFERENCE SHIFTS WITH AGE: While over half of respondents prefer using digital payment apps, baby boomers largely favor traditional payment methods.
- PAYPAL LEADS THE PACK: PayPal is the most used digital payment app, with 85% of digital payment app users using it.
Digital payment apps like PayPal, Cash App, Venmo, and Zelle are becoming as commonplace as the Visa or Mastercard found in most wallets.
How have these apps and others like Google Pay and Apple Pay gained so much popularity in relatively few years? The Motley Fool Ascent surveyed 2,000 Americans to find out -- and to get a better understanding of what people value in the digital payment apps they use.
Three-quarters of Americans trust digital payment apps at least as much as they trust cash or credit and debit cards and over half (57%) prefer to use apps to make purchases and pay back friends and families.
Views towards digital payment apps vary by generation, as does how often individuals use apps and which apps they prefer. For example, the majority of baby boomers prefer to use traditional payment methods, while younger generations prefer apps.
For more insights into digital payment app usage and which features Americans prioritize in digital payment apps, read on.
The majority of Americans trust digital payment apps as much as or more than cash or cards
Three-quarters of Americans trust digital payment apps at least as much as they trust traditional payment methods like cash or credit and debit cards.
Do you trust digital payment apps more than traditional payment methods, like using cash, a debit card, or credit card?
| Response | Gen Z | Millennials | Gen X | Baby Boomers | All respondents |
|---|---|---|---|---|---|
| I trust digital payment apps as much as I traditional payment methods | 39% | 45% | 54% | 55% | 48% |
| I trust digital payment apps more than traditional payment methods | 30% | 32% | 25% | 17% | 28% |
| I trust digital payment apps less than traditional payment methods | 31% | 23% | 20% | 28% | 25% |
Trust is a prerequisite for digital payment apps to gain popularity. If users aren't sure if transactions will be complete or are worried they won't be able to pull cash from the app into their bank, chances are they're going to be skeptical about using it in the first place.
It's notable then that over a quarter (28%) of Americans trust digital payment apps more than cash or cards. That percentage drops to only 17% of baby boomers and is as high as 32% for millennials.
Gen Z, known for being plugged in and online, are counterintuitively the least trustworthy of digital payment apps. Thirty-one percent of Gen Z trust apps less than cash and cards.
Americans prefer digital payment apps over cash or card, except baby boomers
Baby boomers are the only generation for which a majority would prefer to not use a digital payment app to make purchases or settle accounts with friends and family.
Forty-four percent of baby boomers said they would prefer to use a digital payment app in those instances, 31% said they would prefer to use cash or card, and 25% had no preference.
Younger generations felt differently. The majority of Gen Z (60%), millennials (61%), and Gen X (54%) would prefer to use digital payment apps. A smaller percentage of those generations would prefer to use cash or card compared to baby boomers.
Interestingly, Gen Z are simultaneously the least trusting of digital payment apps but second most likely to say that they prefer to use them.
Overall, 57% of Americans would prefer to use digital payment apps over cash and cards. A fifth would prefer to use traditional payment methods, while 23% have no preference.
Would you prefer to use digital payment apps or traditional payment methods, like cash, a debit card, or credit card?
| Generation | I would prefer to use a digital payment app | I would prefer to use a traditional payment method | No preference |
|---|---|---|---|
| Gen Z | 60% | 22% | 18% |
| Millennials | 61% | 17% | 21% |
| Gen X | 54% | 19% | 27% |
| Baby boomers | 44% | 31% | 25% |
| All respondents | 57% | 20% | 23% |
58% of Americans use digital payment apps more than twice a week
A majority of Americans, 58%, use digital payment apps at least twice a week. Millennials and Gen Z are the most frequent users of digital payment apps. Baby boomers use digital payment apps the least.
Fifteen percent of baby boomers -- who carry skepticism for digital payment apps and a preference for cash and cards -- never use digital payment apps. Another 49% of the generation use apps like Venmo and Zelle less than once a week.
Gen Z and millennials are relative power users of digital payment apps. Sixty-four percent of those generations each use digital payment apps more than twice a week. They're also the generation with the fewest members who never use apps for transactions, although Gen X isn't far behind.
How often do you use digital payment apps like Venmo, Zelle, PayPal, or Cash App?
| Generation | Once a week or less | Two to five times a week | Over five times a week | Never |
|---|---|---|---|---|
| Gen Z | 30% | 44% | 20% | 7% |
| Millennials | 31% | 37% | 27% | 5% |
| Gen X | 38% | 36% | 18% | 7% |
| Baby boomers | 49% | 26% | 9% | 15% |
| All respondents | 35% | 37% | 21% | 7% |
PayPal is the most popular digital payment app
PayPal is by far the most popular digital payment app. Among respondents who use digital payment apps, 85% use PayPal. Cash App is the second most popular among digital payment apps, followed by Venmo and Zelle.
Which digital payment apps do you use?
| Payment app | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| PayPal | 81% | 85% | 87% | 87% | 85% |
| Cash App | 68% | 59% | 45% | 36% | 54% |
| Venmo | 42% | 45% | 32% | 22% | 38% |
| Zelle | 36% | 31% | 22% | 22% | 28% |
| Apple Pay | 47% | 31% | 16% | 16% | 28% |
| Google Pay | 11% | 25% | 20% | 13% | 20% |
| Other | 2% | 2% | 3% | 4% | 3% |
PayPal's popularity is likely driven by a few factors.
The company was founded and went public well before the app ecosystem came to fruition -- and long before other digital payment apps were built. PayPal was among the first online money transfer systems and gained significant popularity and trust among users as a go-to for completing eBay transactions (eBay bought PayPal in 2002 after PayPal went public.)
Fast forward two decades and PayPal is now among the most versatile and easy to use digital payment apps. Transactions can be made with email addresses, phone numbers, or QR codes. Business integration is another strong point for PayPal relative to its peers.
PayPal's name and brand recognition alongside its strong reputation likely explains its popularity among baby boomers. No other digital payment app comes close to PayPal's usage among boomers.
While over 80% of Gen Z and millennials use PayPal, over half use Cash App as well, and over 40% use Venmo.
Venmo is owned by PayPal and is convenient for sending money to friends and family to split bills or send money for a special occasion. Venmo boasts free transactions, although its business functionality remains somewhat limited.
Cash App, the most popular digital payment app after PayPal, enjoys a simple user interface and the unique ability to buy, sell, and withdraw Bitcoin, and to buy and sell stocks.
Millennials are more likely than Gen Z to use Venmo and Google Pay, while Gen Z prefer Apple Pay, compared to older generations.
60% of Americans use digital payment apps for purchases
While digital payment apps soared to popularity as a quick and convenient way to settle accounts among friends and family, it's also used by 60% of Americans to make purchases from businesses.
For what purpose do you use digital payment apps?
| Purpose | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| To make transactions with friends and family | 85% | 84% | 78% | 68% | 81% |
| To make purchases from businesses | 59% | 64% | 55% | 54% | 60% |
| To facilitation transactions for a business I work for | 18% | 20% | 15% | 8% | 17% |
| Other | 6% | 7% | 9% | 14% | 8% |
Eighty-one percent still use apps to send and receive money from friends and family, but the popularity of use at businesses suggests that digital payment apps could move into lucrative territory traditionally dominated by credit and debit card issuers.
Cash transfer speed is the most valued digital payment app feature
The speed at which money can be transferred from a digital payment app to the user's bank account is the most important feature that Americans consider when choosing a digital payment app.
Rank the most important features you look for when choosing a digital payment app, with 1 being most important.
| Features | Gen Z | Millennials | Gen X | Baby boomers | All respondents |
|---|---|---|---|---|---|
| How long it takes to transfer funds from the app to a bank account | 3.3 | 2.9 | 2.8 | 2.4 | 2.9 |
| Transfer fees | 3.3 | 3.1 | 3.1 | 2.8 | 3.1 |
| Brand trust | 3.7 | 3.6 | 3.4 | 3.1 | 3.5 |
| Usage among businesses | 4.0 | 4.0 | 3.8 | 3.5 | 3.9 |
| The ability to split transactions | 4.0 | 4.2 | 4.1 | 3.9 | 4.1 |
| Social features | 4.2 | 4.5 | 4.6 | 4.2 | 4.4 |
| The ability to invest in securities or cryptocurrencies from within the app | 4.2 | 4.7 | 4.6 | 4.5 | 4.6 |
Transfer fees -- or lack thereof -- are the second most important feature, followed by brand trust, usage among business, and the ability to split transactions.
Social features -- like Venmo's feed that shows transactions among friends -- and the ability to invest in stocks and crypto from the app -- which is allowed by Cash App -- were the least important features.
How to protect yourself from Venmo scams
Venmo accounts and accounts associated with other digital payment apps are targets for scammers, and many follow a similar playbook to scams used to gain access to other financial accounts.
To avoid Venmo scams and other digital payment app scams follow these rules of thumb:
- Do not sign into your account from outside the app or official website associated with the app. Scammers may ask you to log into your account via an unofficial website that looks real in order to capture your credentials and gain access to your funds.
- Do not give credentials and other login information to anyone over the phone, text, or email, even if they claim to be a company representative.
Digital payment apps are also commonly used to complete transactions with strangers for buying and selling items online like furniture or concert tickets.
- In these instances, do not provide payment until you have received the item, and when possible complete the transaction in person to confirm the identity of the recipient of the funds.
Scammers have also been known to set up accounts impersonating friends of their target. Scammers posing as a friend will then send a payment request in hopes that the target will send funds without question.
- Check with friends about unexpected payment requests from them before sending money.
- Look at the profile that sent the payment request and see if their transaction history and network matches what you'd expect from your friend.
- If the account is a scammer, block them.
Note that most peer-to-peer money transfer apps do not offer fraud protection. Venmo, Zelle, PayPal Family and Friends, and Cash App, for example, generally do not. In most instances, if money is transferred to a scammer through those apps, it's unlikely that it will be returned.
The best way to steer clear of scams is to only use these and similar apps to send money to people you know, like friends and family.
FAQs
Venmo is a peer-to-peer platform that allows money transfers between individuals and businesses known to users.
Venmo makes money not through transaction fees, transfer fees, or subscriptions, but through interest earned on money in Venmo accounts, interchange and withdrawal fees, fees on credit card transactions and cashing checks, fees on instant transfers from Venmo accounts to bank accounts, and Pay With Venmo and cash back commissions.
Venmo transactions can be funded via credit or debit card, a linked bank, or an accounts Venmo balance, which is composed of funds received from other Venmo users.
Zelle is a peer-to-peer payment platform that allows users to send and receive money directly from and to bank accounts. Zelle can be accessed via many banking apps.
Transfers with Zelle move directly between bank accounts even if users in a given transaction bank at different institutions.
Zelle also does not charge a fee for instant transfers. Transactions can process within minutes via Zelle.
Apple Pay is a digital wallet, which means it stores digital versions of credit and debit cards which can be used to pay vendors in-person with the tap of your iPhone or Apple Watch, or online.
Apple Cash can be used to send money between individuals. Apple Cash defaults to using funds from your Apple Cash balance. However, if sufficient funds aren't available, you can use a debit card in your Apple Pay wallet.
PayPal allows for transactions among individuals and businesses.
Individuals can transfer money between PayPal accounts. Businesses can use PayPal as a payment option both in-person and online, and can use it to generate invoices for customers. Transactions can be completed even if the recipient of the funds does not have a PayPal account.
PayPal is a publicly traded company not owned by an individual, group, or other company or entity.
Founded in 1998, PayPal became a publicly traded company in 2002 and was bought by eBay later that year. In 2015, PayPal was spun off from eBay.
Costco accepts Apple Pay in addition to other digital wallets like Google Pay and Samsung Pay.
Venmo allows credit cards to be used to complete a Venmo transaction, but Venmo will charge a 3% fee and your credit card issuer could consider the transaction a cash advance (which can incur additional fees).
A digital wallet is an application that stores digital versions of credit cards and debit cards and allows their use in lieu of a physical card. Digital wallets can be stored on smartphones, tablets, smart watches, and computers.
Digital wallets can also store gift cards, tickets, transit cards, and other types of cards and tickets.
Most digital wallets also allow users to transfer funds to other people.
Digital wallets are usually dependent on the hardware they exist on. iPhone and Apple Watch users have access to the Apple Pay digital wallet, for example, while Android users have access to Google Pay or Samsung Pay depending on the manufacturer of their device.
Methodology
The Motley Fool Ascent surveyed 2,000 American adults via Pollfish on March 6, 2023. Respondents were 40% male and 60% female.
Our Research Expert
Jack Caporal is the Research Director for The Motley Fool and The Motley Fool Ascent.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.