PayPal is using cashback incentives to grow its Venmo debit card user base, an anchor that could help the company monetize Venmo over the longer term.

This month, PayPal began offering new Venmo debit card users a 5 percent cashback incentive (up to $20) on grocery purchases made with the Venmo debit card before June 30. According to a PayPal spokesperson, the company currently is testing “various incentives” with Venmo card users to help identify the types of rewards that deliver value to cardholders.

Physical cards are part of an effort to monetize Venmo retail transactions through interchange and other fee revenue. According to analysts, cashback offers and other incentives will help PayPal grow Venmo use beyond peer-to-peer payments to physical retail.

“This is an effort to make using the Venmo card habitual,” said Paygility Advisors partner David True. “They’re trying to encourage card usage at a merchant the consumer visits often — grocery.”

PayPal launched the Venmo debit card nearly a year ago. While peer-to-peer payments aren’t a money maker for PayPal, debit card and other physical retail transactions offer new monetization opportunities through interchange revenue at the point of sale and other fees customers may rack up, including fees for withdrawals at non-MoneyPass ATMs or those carried out over the counter at banks or financial institutions. Digital Venmo payments online or in-store, and the 1 percent fee the company charges for instant transfers, are other ways the company can generate revenue from Venmo. PayPal reportedly is also working with Synchrony Financial on a credit card offering.

“What we’re really seeing across the user base is those Venmo users, while still growing in number quite rapidly, are deepening their engagement with us and looking for more and more products from us,” said Bill Ready, PayPal’s executive vice president and chief operating officer, in a first-quarter earnings call last month. With Venmo usage reaching 40 million, the company is looking for new ways to reach a loyal customer base.

Venmo and PayPal-branded cards resonate well among millennials, according to a 2017 Cornerstone Advisers survey. Among millennials surveyed on their openness to using a debit card from a peer-to-peer payments provider, the percentage of those who said they would be very likely to use such a card — possibly as a primary card — were 44 percent for PayPal and 24 percent for Venmo.

“Venmo users have more than $2 billion sitting in their accounts — that is, if they don’t move the money back to their checking accounts,” said Ron Shevlin, director of research at Cornerstone Advisers. “This is a big opportunity for Venmo.”