Venmo, which is owned by PayPal, is expanding its cryptocurrency support with the launch of a new feature today that allows users to automatically buy bitcoin using cashback earned from Venmo credit card purchases.
Unlike when purchasing cryptocurrency directly, these automatic purchases will not incur transaction fees – a feature Venmo claims is not marketing, but rather how the system will function in the long run. Instead, each monthly transaction includes a cryptocurrency conversion spread.
Cardholders can now acquire Bitcoin, Ethereum, Litecoin, and Bitcoin Cash through the Venmo app’s new “Cash Back to Crypto” option, which is available immediately. In April of this year, Venmo added the option for clients to buy, hold, and trade cryptocurrencies as part of a wider cryptocurrency initiative sponsored by parent company PayPal.
Venmo’s more than 76 million customers can now access cryptocurrencies directly within the Venmo app, thanks to a partnership with Paxos Trust Company, a regulated distributor of cryptocurrency products and services.
By tying the cash-back feature to the bitcoin functionality, the cash-back feature could help boost Venmo Credit Card sign-ups. Venmo cards can currently earn monthly cashback in eight distinct areas, with up to 3% back on their top qualified spending category, then 2% and 1% back on the second-highest and all other purchases, respectively. Monthly adjustments are made to the top two categories based on where consumers spend the most.
Customers must go to the Venmo Credit Card home screen in the app, pick the Rewards option, and then “Get Started” to enable Cash Back to Crypto. They’ll next agree to the terms, choose their preferred cryptocurrency, and confirm their decision. When the cash-back funds arrive in the customer’s Venmo account, they are immediately used to make a bitcoin transaction – no user engagement is necessary.
There will be no transaction fees because each monthly transaction includes a cryptocurrency conversion spread. This is comparable to how PayPal handles Checkout with Crypto, which allows online shoppers to use their bitcoin to make transactions. There are no transaction fees when the cryptocurrency is converted to fiat.
Cash Back to Crypto, according to the company, is a means for beginners to cryptocurrencies to get into the market without having to bother about the process of buying bitcoin. It’s more of a set-it-and-forget-it feature than anything else. These cash-back-enabled crypto purchases will likely be minor until customers make regular and frequent transactions with their Venmo Credit Card.
The company hasn’t revealed how many Venmo credit card users are currently active in the market.
So far, PayPal CEO Dan Schulman has only stated that the card “is surpassing our expectations for both new accounts and transactions” during the company’s first-quarter earnings call. The CEO also mentioned that the company was experiencing “high adoption and trade of crypto on Venmo” this quarter.
Venmo Credit Card customers will be able to use the Cash Back to Crypto feature starting today. Customers can use their cash back earned each month to automatically and seamlessly purchase one of four cryptocurrencies.
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