How PayPal's user growth and stock price have risen after teaming up with former foes like Visa; sources: Venmo still loses hundreds of millions annually
In late 1999 a young computer scientist named Max Levchin started receiving emails from strangers about a web demo he'd created to illustrate the workings of an app.
Context & Ripple Effects
When PayPal announced its Visa alliance in 2016, investors treated it as a capitulation — the stock took its biggest single-day drop since the eBay split on fears of higher transaction costs. This Bloomberg piece revisits that bet: partnerships with former foes have since coincided with rising user counts and a recovering share price.
The tension sits in Venmo. It scaled from an estimated 7M monthly users processing $18B in 2016 to 52M users and $29B in payment volume by late 2019, yet sources tell Bloomberg it still loses hundreds of millions annually — the Pay with Venmo merchant checkout push has grown engagement faster than it has closed the monetization gap.
First-order effects
- Investors who sold PayPal on transaction-cost fears now hold a stock whose recovery is attributed partly to those same rival partnerships, as user growth compounds across networks PayPal once fought.
- Venmo keeps absorbing hundreds of millions in annual losses while its user base scales, meaning every new merchant accepting Pay with Venmo extends PayPal's subsidy period.
Second-order effects
- The Visa relationship is turning from a cost line into a product line — Venmo's co-branded Visa credit card converts the alliance into interchange economics rather than pure expense.
- Planned Amazon acceptance gives Venmo a top-tier merchant surface to convert social-payment engagement into revenue, raising pressure on competitors' own P2P apps to find equivalent checkout distribution.
Third-order effects
- Payments competition is reorganizing around network cooperation: former rivals become distribution channels, and loss-making growth assets inside profitable parents stay fundable as long as user metrics compound.
- If the pattern holds, valuations for payments platforms will hinge on the timeline for monetizing user scale — the exact question Venmo's persistent losses keep open.
The trend: Payments platforms are converting former rivals into distribution partners, trading near-term margin for reach while monetization trails user growth.