In a surprising turn of events, Amazon has announced the discontinuation of Venmo as a payment method. Users will no longer be able to utilize Venmo for payments, while Amazon will continue to accept Venmo debit and credit cards.
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In this photo illustration, a Visa credit card is seen above the Amazon logo on the mobile app splash screen on November 17, 2021 in London, England. The online retail giant cited Visa's high service fees for its decision to stop accepting UK-issued Visa credit cards for payment.
Discontinuing Venmo as a Payment Method
Amazon has informed users that starting from January 10, it will discontinue the acceptance of Venmo as a payment method. Users will no longer be able to make payments using Venmo, although Amazon will still support Venmo debit and credit cards, as indicated in a notice sent out to customers.
Venmo confirmed this change in a notice on its website, explaining that recent developments prevent the addition of Venmo as a payment method. However, existing users with Venmo enabled in their Amazon wallet can continue using it until January 10, 2024.
A spokesperson from Amazon confirmed the alteration, assuring users of the availability of nearly a dozen other payment methods. However, the company did not provide specific details on the reasons behind removing Venmo.
Mutual Decision
According to a statement from a Venmo spokesperson to CNBC, both Venmo and Amazon mutually decided to disable Venmo as a payment option. The spokesperson emphasized the strong relationship between the two companies and expressed anticipation for future collaborations.
Amazon has reversed its decision made last October to incorporate Venmo as a payment method during checkout, a move aimed at providing customers with more payment choices.
Venmo, a widely-used payment service facilitating instant money transfers between users, was expected to enhance Amazon's payment options.
Following this announcement, shares of PayPal, the owner of Venmo, experienced a 1.7% decline on Thursday.
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Evercore ISI analyst David Togut expressed that he interprets this development as a response to limited user adoption, indicating a lack of traction for Pay with Venmo as the preferred checkout method among consumers.
Togut, who assigns an In-Line rating to PayPal stock with a $65 price target, highlighted recent discussions by PayPal regarding partnerships with various online retailers, including Uber Technologies, Abercrombie & Fitch, and others.
However, Barrons reported that he raised concerns about PayPal's potential challenges in monetizing these platforms following the recent announcement.
In his note, Togut referred to their initial analysis in October 2022, which suggested no significant impact on PayPal's earnings per share if 2.5% of Amazon's gross merchandise value originated from Pay with Venmo.
Given the latest development, Togut anticipates that the volumes from Amazon using Pay with Venmo will be considerably less than 2.5%, indicating no substantial impact on forward estimates.
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