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. 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. Rather than have an awkward conversation about money that is owed, friends can send a message through Splitwise. Splitwise primarily makes money through the use of occasional advertisements and through its paid subscription upgrade service, called Splitwise Pro.
The app is marketed as a way 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 as soon as the cost is incurred. For splitting bills with friends and family, Splitwise can track each expense and the amount that each person in the group owes. Splitwise then allows users to total all of the expenses that they owe and automatically transfer the total payment to others in the group. Users can make payments by cash, or in the case of U.S. users, by online payment services like PayPal (PYPL) and Venmo. The service charges a fee for certain debit card and credit card transactions. Splitwise does not facilitate the transfer of money directly through its app, and users may have to pay third-party transfer fees.
Plates 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.
The cloud-based Splitwise app is available for iPhones, Android devices and computers. The company was founded in 2011 and is based in Providence, Rhode Island. As a startup with minimal public financial information available, it is difficult to assess how much money Splitwise has made since its founding. According to Crunchbase, the company has raised a total of $10.2 million over a series of five financing rounds, as of June 2019.
Splitewise's Business Model
Splitwise is a free app for users, so the firm does not generate revenue from its user base. The privately owned firm raised $1.4 million in seed capital from investors on Dec. 16, 2014, and the funds were used for operating expenses and to attract venture capitalists.
As a free app, Splitwise does not charge users to download or utilize its basic service. Company documentation suggests that users may see advertisements in the course of utilizing Splitwise, providing one source of revenue for the company. As Splitwise has continued to develop and to grow in popularity, the company has also introduced a paid subscription model called Splitwise Pro, which is available to current Splitwise users for a monthly or annual fee.
Key Takeaways: Splitwise
- 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
- Plates, a secondary app, focuses on dividing costs associated with group meals and includes a tax and tip calculator
- The company primarily earns revenue through the potential use of advertisements and through its paid subscription service, Splitwise Pro, which offers added functionality
Although company documentation suggests that users of Splitwise's free service may experience advertisements, in reality it appears that ads appear minimally, 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.
Splitewise's Paid Service
Splitwise Pro is a paid upgrade to existing Splitwise accounts, available for a variable monthly or annual rate depending upon the time at which 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.
Splitwise's Transaction Fees
Splitwise may receive a portion of transaction fees paid by the user in order to facilitate payment transfers via PayPal or debit and credit cards. As above, it is difficult 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 at all, as Splitwise does not have publicly available financial reports. Nonetheless, because the transactions do not take place within the app itself, Splitwise is able to keep its service free to the user, even if payments themselves in order to settle up debts owed do incur separate fees.
Like many other startups, Splitwise did not generate significant revenue early on in its development. However, the firm has used capital to strengthen the app's offerings and to grow its user base.
Several trends make the Splitwise app more attractive to the marketplace. Splitwise is considered a shared finance app, an area that many banks and other financial institutions have not focused on. While these financial institutions tend to focus on financial management services for customers, many firms have ignored the benefits of a shared finance app. Splitwise is a tool that allows its users to move toward a cash-free financial system.
As with all startups, Splitwise has to address key challenges related to sustainability and growth. Public data regarding the company's user base is unavailable, but the fact that Splitwise has generated more than $10 million in investor funding over five rounds since its founding in 2011 suggests that there is outside interest in supporting the growth of the company.
Splitwise also faces a challenge in its competition. Though the shared finance app industry is relatively small, it is nonetheless growing. Competitors like Tab, Settle Up and Splittr all offer similar services and are thus vying for the same user base as Splitwise.