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Amazon (NASDAQ:AMZN) announced on Tuesday that it will begin offering PayPal’s (NASDAQ:PYPL) Venmo as a new payment option for orders on Amazon.com and the Amazon mobile app.
The tech giant said Venmo will begin to roll out to select customers today and will be available to U.S. customers by Black Friday.
“We want to offer customers payment options that are convenient, easy to use, and secure—and there’s no better time for that than the busy holiday season. Whether it’s paying with cash, buying now and paying later, or now paying via Venmo, our goal is to meet the needs and preferences of every Amazon customer,” said Max Bardon, vice president of Amazon Worldwide Payments.
Following the news, Morgan Stanley analysts said the rollout is an “important first step.”
“This timing is consistent with initial commentary from the company, which expected the roll-out to occur in 2H22. While we would expect this to have an immaterial impact on financials given likely limited economics to PYPL, we think it is an important catalyst,” wrote the analysts.
They added that the move could help propel Venmo into other merchants to grow the overall acceptance network. In addition, the analysts believe it will “increase habituation for Venmo users especially given the frequency with which most use Amazon, which would improve frequency of use elsewhere, allowing for better monetization.”
“Given Venmo skews more to the younger Gen Z/Millennial demographic than PYPL users more generally, we think it will be important for PYPL to transition its ~90M Venmo users from using mostly P2P to more monetizable forms of payment, like Pay with Venmo. This is especially true given we estimate Venmo currently generates half of its revenue from instant transfer revenue that could potentially face regulatory/disruption risk in the future. This Amazon partnership can be an important first step in accomplishing this, and increasing Venmo’s revenue base beyond its current ~$1.2B revenue run-rate,” the analysts concluded.
