How Splitwise Makes Money

Splitwise is a free app that allows consumers to split expenses with friends. If a group needs to share the cost of a particular bill, Splitwise ensures that anyone who pays is reimbursed the correct amount and with a minimal number of transactions. With Splitwise, users can send an email notification when a bill is due, and the app allows users to send an IOU to someone else in the group.

The app is marketed to keep track of informal debts, including the cost of rent, dining and travel expenses, bills, and more. Users of Splitwise enter notes into the app about who they owe, who owes them, and why. This service eliminates the need to keep receipts because a user can add any expense to the app when the cost is incurred.

“With Splitwise, users can make payments via online payment services like Paypal and Venmo, which may charge a fee for specific debit card and credit card transactions. Splitwise also offers Splitwise Pay for direct payments from the app through a connected bank account.

Splitwise Pro is a paid upgrade (approximately $3 to $5 a month) to existing Splitwise accounts, available for a variable monthly or annual rate depending upon when the account was established, the country, local taxes and regulations, and more. Pro users see reduced advertisements, a receipt scanning and itemization service, currency conversion, expense search, early access to new features, and more.

Key Takeaways

• Splitwise is a free app allowing users to quickly and easily calculate and pay each other back for informal debts like bills, shared meals, and travel.
• The company primarily earns revenue through the potential use of advertisements and its paid subscription service, Splitwise Pro, which offers added functionality.
• Splitwise is one of many fintech apps designed to help people manage money. Splitwise integrates with Venmo and Paypal for payments, subject to applicable third-party transfer fees, and offers Splitwise Pay for direct payments through a linked checking account.
• In April 2021, Splitwise received $20 million in funding from the private equity firm Insight Partners.

Splitwise’s Industry

Splitwise is used via a mobile app and web platform that uses fintech software. This thriving industry offers users technology to help them enhance or automate financial transactions.

A bill-splitting app, it operates in the same realm as its competitors like Tab, Settle Up, and Splid, which all offer similar services that provide easy ways to split up bills and pay debts within groups. Splitwise, when used in conjunction with Venmo or Paypal, allows users to jettison paper money in favor of digital transactions.

The global fintech industry has a long reach. According to Plaid, nearly nine out of 10 consumers had adopted a form of fintech into their lives by 2021.

Fundraising and Financials

Public data regarding the company’s user base is unavailable. Still, Splitwise has generated more than $30 million in investor funding over six rounds since its founding in 2011, suggesting outside interest in supporting the company’s growth. In the sixth round of funding in April 2021, according to Crunchbase, the company raised $20 million.

Splitwise may receive a portion of transaction fees paid by the user to facilitate payment transfers via PayPal or debit and credit cards. Still, it isn’t easy to assess just how significant this source of revenue may be for the company, or even if it can be considered a major revenue stream, as Splitwise does not have publicly available financial reports. Nonetheless, because the transactions do not occur within the app itself, Splitwise can keep its service free to the user—even if payments themselves incur separate fees to settle up debts owed.

The cloud-based Splitwise app is available for iPhones, Android devices, and computers. Splitwise as a free limited app makes money through occasional advertisements. Its paid subscription upgrade service, called Splitwise Pro, is ad-free and unlocks advanced features.

Although company documentation suggests that users of Splitwise’s free service may experience advertisements, in reality, ads seem to appear sparingly, if at all. Because the company does not provide public financials, it is difficult to assess if Splitwise earns significant revenue from advertisements and, if so, what these figures may be.

Note

Plates by Splitwise is a separate free app offered through Splitwise that simplifies the process of splitting up a restaurant bill. This app allows diners to enter each dish ordered and split the cost of shared items, such as appetizers. The Plates app calculates the tax and tip, and each person in the group receives an email notification of the amount owed. This service can also link with the Splitwise app.

Splitwise History

The Providence, Rhode Island-based company was founded by Jonathan Bittner, Marshall Weir, and Ryan Laughlin, who handles the web design and development, in 2011. According to his bio, Bittner, a former astrophysics graduate student at Harvard, was interested in creating an app to assist quantitative fairness.

The company aims to provide “mediation advice about fairness.” While the backstory isn’t on the website, users can search through the archives of the company’s blog posts back to 2011 to understand how they operate and create. As a free app, Splitwise does not charge users to download or utilize basic limited service and offers a service called Splitwise Pro for approximately $5 a month.

In 2019, the company refreshed and redesigned its entire platform, including the homepage, logo, and mobile app.

Important

Company documentation suggests that users may see advertisements in the course of utilizing Splitwise, providing one source of revenue for the company.

Recent Developments

 In April 2021, Splitwise Inc. announced they had raised $20 million in Series A funding led by global venture capital and private equity firm Insight Partners. According to a company-approved press release, Splitwise will “use the funding to grow its team, accelerate global customer growth, and create new partnerships with fintech and financial services platforms.”

Since its inception, $90 billion in total transactions have been split on the Splitwise platform, and in April 2021, Splitwise launched a significant refresh of its Android app.

The Bottom Line

The new round of funding for Splitwise indicates a continued demand by consumers for fintech applications. Splitwise does not provide exact metrics on its active users, but the company appears poised to grow, and an app that helps groups of friends and family keep track of money owed, most likely will continue to be in demand.

How Do You Use Splitwise?

You can use Splitwise using its mobile app on your phone. It acts as a digital IOU, and it easily calculates what each person in a group owes. You can also make payments using third-party apps like Venmo or through a linked checking account via your Splitwise app.

How Much Does Splitwise Cost?

Splitwise is free for limited use but you can sign up for Splitwise Pro for around $5 a month.

Is Splitwise Linked to a Bank Account?

You cannot link Splitwise to a bank account as it does not support cash transactions. Splitwise only keeps track of expenditures and IOU debts.

What Is the Splitwise Calculator?

Splitwise offers a range of fairness calculators on its website from a calculator for splitting the rent to a travel calculator.

Is Splitwise Safe?

Splitwise does not handle any cash transactions, nor does it link to personal banking details, making it safer than other apps.

What Are Alternatives to Splitwise?

SettleUp, Tab, and Splid are all similar to Splitwise.

Read the original article on Investopedia.