The $70 billion per year run rate of payments on Venmo is a massive drag on PayPal's take rate since the company typically doesn't collect a percentage of peer-to-peer payments. PayPal's ability to monetize Venmo is a big part of its future. Square also recently increased the fee on its instant deposit feature to 1.5% from 1%. Instant transfer has proven popular enough that PayPal is raising the price from $0.25 per instant transfer to 1% (with a $0.25 minimum) starting next month. Venmo transaction volume increased 78% year over year last quarter. Both apps also benefit from the network effect, which encourages more transaction volume on the apps from existing users as new users join. The expanded functionality of the apps gives consumers more reasons to download them and more reasons to use them. For reference, Square says Cash Card users spent $250 million in June. The Venmo card, meanwhile, saw transaction volume grow 320% month over month in September (but management doesn't provide any details on total volume). So, PayPal is already close to catching up. By comparison, Square processed $4 billion in instant deposits in the second quarter across both merchants and consumers. Venmo processed $1 billion in instant transfer volume from Venmo in September. PayPal has copied some of the most successful new features - notably instant deposits and the debit card.

It offered in-app bitcoin buying and selling, the ability to receive direct deposits in the app, instant transfers from the app to a checking account, and a debit card linked to the balance in the app. Square's Cash App's rapid growth is tied to a string of new product releases over the last couple of years. The Venmo app open on a phone sitting on a table of apparel.

Download venmo to cash app