Samar Sikka discusses the origins of Venmo, future growth strategies, and business strategy with Hassan Ahmed, HBS ’11.
Venmo – the one app you will find across every student’s phone at the Harvard Business School. Just as Facebook has forever changed the way we share and interact with the world, Venmo has quintessentially revolutionized how we make and receive payments taking away the awkwardness of requesting money & exchanging cash and instead adding a fun social element to it. But there’s more to this simple yet unique service than meets the eye. Mr. Hassan Ahmed, HBS Class of 2011 and a business operations manager under the Chief Operating Officer organization at Venmo, speaks to Harbus about the origins of Venmo, its future growth strategies, competition, his role in growing the business and about his time at HBS. Hassan navigated his way across consulting, banking, private equity and HBS before joining Venmo. Today, his role lies at the core of growing Venmo and expanding the business requiring him to align resources against business priorities and deliver high-impact initiatives related to monetization and user growth.
- What inspired you to switch to the Fintech industry and Venmo after having spent considerable time in Consulting, Banking and Private Equity and what were the biggest challenges and opportunities in doing so?
I’ve been fortunate to have exposure to various financial services sectors over the course of my career while learning how to scale businesses as an advisor and operator. I started considering Fintech during my time in corporate strategy at Merrill Lynch Wealth Management, where I had an incumbent player’s view of disruptive innovation in the personal investing space. As software eats the world, tech companies are finding new ways to solve problems and wrapping business models around it, and I wanted to participate and keep developing my own skills to stay relevant. Beyond the technology, there is an ethos of user experience, democratized access to tools, and transparency with newer companies that resonated with me personally.
The opportunity of being at Venmo is a front-row seat in writing the next chapter of an entire industry and playing a role in impacting the direction of the company. It’s also fun to be associated with a product that users love and use as a verb!
- What are the drivers of innovation at Venmo?
Venmo was born from a personal need of the founders to find an easier way to pay each other back when one forgot to bring his wallet at dinner. While that planted the seed of the idea, it took years of experimentation and refinement to achieve product-market fit and lift-off. The culture and approach of the company in the early days laid the foundation for the business to thrive and innovate.
The company recognizes the individuality of its employees and create space for people to express themselves in their craft. Teams and individuals are not just allowed but encouraged to engage in creative problem-solving because there is a culture of trust. As a result, unexpected ideas and results occur when that level of autonomy is permitted. For example, our app has an emoji auto-complete feature that finds emojis for you as you write out words. The idea surfaced through a junior engineer that recognized the problem, hacked a solution over a weekend and was allowed to ship it. There is a healthy balance between process and free-form thinking and we try to be deliberate about it. Tactically, I had the opportunity to help organize an internal hackathon where engineers and non-technical employees generate ideas and work on hacks. The creativity and breadth of the demos that resulted were very inspiring!
I’ll also say that Venmo has a culture of not just being user-first in our thinking but actively crafting and celebrating user delight. If you listen to the stories shared around our lunch table, there’s a lot of customer empathy in the air. Everyone’s in it together to deliver great experiences, which perpetuates new ideas.
- What is Venmo doing to differentiate itself in the Fintech and payments space?
Venmo is the only pure social payments player in the space. We’ve removed the complexity of sending and receiving money allowing us to focus on the emotional aspect of payments. Every payment has a story! Long after the money has changed hands, people remember the events leading to that transaction, like a great dinner with friends or an epic road trip or even paying rent. We provide a place to capture and tell those stories. Our users also tell us that Venmo takes out the social awkwardness of talking about money, that it saves friendships! No other payments product has that level of emotional resonance, which is why our users tell us over and over how much they love using Venmo!
- What is Venmo’s revenue model?
Venmo waives all fees for P2P payments if you use a debit card or bank account. We do charge a 3% fee on credit cards for paying your friends, although most of that is pass-through. Venmo has also recently entered commerce, enabling users to pay in select merchant apps using their Venmo wallet. In those instances, we charge the merchant a standard fee for transaction processing.
- Where do you see the financial payments industry in the short and the long term?
The payments industry is a fascinating ecosystem marked by co-opetition among issuers, networks, processors, merchants and so on, as well as non-traditional tech players like Apple, Google and Samsung as well as social networks like Facebook and Snapchat. There’s always something new and emerging. I’ll comment on three significant themes persistently shaping the industry.
First, mobile payments and merchant wallets have taken off exponentially, driven by the smartphone adoption and a number of improvements to the payments architecture over time. Industry leaders have started delivering value-added use cases like order ahead and better loyalty programs demonstrating it’s not just an analog to digital substitution. One example being the Starbucks app with a mobile wallet that processes 5 million transactions a month on its app.
Second, there’s a related theme of payments becomes ‘invisible’ altogether and being abstracted away from the shopping experience. Uber is a great example of invisible payments, and has probably accelerated the trend. This theme also shows up in contextual commerce, like Pinterest Buy buttons, thats let user’s complete purchases in the flow of their buyer journey without being sent to a checkout page.
Finally, I also expect ongoing consolidation, JVs and partnerships in the industry, given the complexity of providing an end-to-end payments experience. Payments partnerships are becoming increasingly common with retailers, operating system providers, social networks – basically any vertical where payments aren’t the core competence. Longer-term, if valuations revert to historical levels, some assets in the industry could be in play not just by other payments firms but anyone serving the commerce space in general.
- What are Venmo’s biggest challenges and opportunities today?
Venmo is fortunate to be in a position to help users and experience fast growth. While Venmo has historically been a way to let friends pay each other, we believe that’s just the starting point. Our mission is to connect the world and empower people through payments. We’ve recently started enabling users to use Venmo to pay in some of their favorite apps such as Munchery, delivery.com, and a handful of others. There are a number of related initiatives underway for users to check out with Venmo in other contexts. Our challenges have to do with continuing to scale the organization to support growth, hiring and retaining the best people that fit our values, and staying nimble.
- What has been your biggest challenge at Venmo?
Gathering payments domain expertise and learning the organizational cadence for a small, fast-moving company were areas I initially had to learn. Luckily, my teammates have been great and I’ve had a lot of support along the way to get me moving. These days, my challenges consist of not just doing things right, but doing the right things – recognizing where I can have the greatest impact on the organization and directing my energy accordingly. For example, a few months ago, a colleague and I realized there was an opportunity to improve coordination between the operation and product development teams, so we ended up pitching and ultimately creating a Business Operations group for ourselves to help plug that gap.
- How is Venmo planning its growth strategy for the future given that the online payments space is getting more competitive by the day?
While there are new competitors and offerings in payments regularly, we believe there’s still tremendous opportunity to grow the pie for all players and reduce friction for consumers. Cash accounts for roughly 20% of all transactions, so there’s plenty of room to grow. That said, the company looks at a combination of user needs, core competence, areas where we can leverage our corporate parent, and competitive factors in strategic planning.
- How would you describe the work culture at Venmo?
I love going into the office! The vibe and attitude is positive and warm, it’s a place with room for individual personalities and genuine friendships to develop. At the same time, everyone is expected to bring their A-game and deliver to high standards. We take our work seriously, not ourselves. In some ways it reminds me of my section experience as an RC at HBS – you feel there’s a crew that has your back. In fact, one of my section-mates was instrumental in helping me get the role.
One of the cool aspects of our work environment is the commitment to employee wellbeing. That includes having a portion of greens at every lunch, healthy snacks, standing desks, and yoga and cardio workouts thrice a week.
- What would you advise graduating MBA students wishing to enter the Fintech industry or wishing to switch career paths?
At an industry level, it’s important to recognize that Fintech is as broad an industry as is financial services and every vertical has its own unique dynamics. There’s still a ton of room for improving user experience and financial lives. This is a heavily regulated industry that requires a lot of operational intensity on the back-end. Building a business in this space takes time, it’s rare to see ‘hockey stick’ growth curves in this space as in some other consumer industries so come in with that expectation.
From a recruiting perspective, even though Fintech has gotten a lot of press coverage in recent years the industry is relatively small, especially once you’ve narrowed the verticals you want to focus on, e.g. lending, investing, insurance, payments. Talk to people at startups, scaleups, and venture capital shops to understand what’s really going on the ground and where hiring needs may be emerging.
- How has your time at HBS helped you add value at work?
As you know, the HBS experience is personal and means different things to different people. For me, HBS gave me conviction to rely on my judgment and developed my capacity to discern and lead. Academically, courses like BSSE with Professor Pisano and LTV with Professor Eisenmann gave me the vocabulary and mental models to understand disruptive innovations and challenges faced by fast growing tech companies. Last but not least, having a great network of friends provides a sounding board and deepens my perspective as we go through post-school life together that I can bring back to my work environment. Keeping it fresh is important!
Samar Sikka (HBS ‘18) Prior to coming to HBS, Samar produced a feature film, Nanak Shah Fakir and co-founded Arteree, a startup in the tech & media space. Born and raised in India, he is extremely passionate about consumer technology and tennis and is an avid Roger Federer fan. When not reading cases, he likes to try out new cuisines and tries to keep track of his innumerable to-do lists. You can follow him on Twitter @samarsikka.