Wednesday, October 16, 2013

Square Cash is a PayPal Killer...

Its rare when my work life and my personal life intersect.  This is one of those rare instances.

If you are a motorsport enthusiast and need to send or receive funds for any reason in an amount up to $2500 a week then you NEED this app/system to save yourself and whoever it is you are transacting with, valuable "transaction" costs.

Square, the San Fran based entity headed by Jack Dorsey (one of the founders of Twitter) and developer of that little, white, plastic, square device you plug into your smartphone to accept swiped payments, has released a new product that I can't really see as being anything but a PayPal killer.

The fact that it might kill Square itself is part of the story as well.

What it is:  Square Cash is an app for your mobile phone (do a search in the App store of your choice) or a method by your email, wherever that happens to be located (your desktop at work, home, library, someone else's phone, etc., you don't need to go to any site initially as when you send your first transaction the system will send you all the links that you need though if you want to check it out before you send your first transaction you can go here: that allows you to transfer funds between bank accounts via debit cards.  Since nearly everyone has a debit card backed by either Visa or Mastercard, the transactions take place over these networks but are connected to the end user's bank/checking/savings accounts (depending upon what accounts you have your debit card linked to).  There is NO fee to either the sender or the receiver, no interest charged as funds come direct from (we'll simplify here) your checking account, minimal delay in funding and the process itself couldn't be more simple.  Enter the email address of the person you are sending the money to, in the "CC:" line you type "" and in the subject line type the amount you want to send--$1.84 (for instance).  If you want to type a note to the person go ahead but its not required.  Click send.  Done.  That's it.

Well, almost.  At your first and ONLY your first time using this service you will get an email bounced back by Square with a link to their site where you plug in your debit card #.  There, now that's it.  After doing this once you'll never do it again and moving forward to send cash all you have to do is type three things--the email address of who you're sending the $ to,, and the amount.  Click send.  That's it.

Its so amazingly simple I was stunned.  No accounts, no passwords, no logins, no charges, nothing.

It works in this method for amounts up to $250 a week.  If you want to send more than $250 a week there is still no cost but you need to provide a bit more information (to help prevent money laundering, terrorist financing and such) like your DOB, full name and last 4 of your SSN.  Doing this allows you to send up to $2500 a week to other people.

I just used it today to pay a friend back for concert tickets he is giving me tonight.  No worrying about withdrawing cash or sending a check and he got the money confirmation instantly.

So why on earth would ANYONE use Paypal again?  No one with a brain and needing to transact in an amount of $2500 or less would.  Given that Paypal likely makes its bones on the aggregation of large numbers of money skimmed off smaller transactions vs. larger amounts from larger payments, Square Cash appears to be a PayPal killer.  Square has the backing of enough major players and as a private company (currently) doesn't feel the need to monetize everything to the nth degree like PayPal and its public Ebay owners do.  Does Square hope that the adoption of Square Cash leads more people to become regular Square merchants paying for payment processing on a larger scale for their small businesses?  Do they hope to bring people into the Square ecosystem and drive the adoption of the Square POS systems?  I don't really know but I think Dorsey has something else in mind.  These two prior suggestions don't seem to make much sense--most of Square's small merchants could likely just switch over to asking clients to pay by Square Cash and avoid transaction fees all together and the use of POS systems for larger scale businesses isn't linked heavily enough to people like you and me trying to pay someone back for lunch or a movie to drive those sales.

There's something else at work here and I'm not seeing what it is.  Square has a lot of backing and can operate without charging for this product for a long time--but they are still having to pay their processing partner each and every time someone sends cash to someone else.  The more people adopt this product the WORSE financially it is for Square as its a cash out ONLY product...there is NOTHING coming back in right now.  Now maybe they can generate more VC investment interest if they can claim "50 million individuals have adopted the Square Cash money transfer method" as this would certainly be a big user base for you to claim.  There is some discussion evidently of opening the service up to international money transfer transactions and charging a fee for those services--but that opens up a whole other kettle of worms to deal Square hasn't branched into with its primary, payment transaction business line so this is a relatively distant, risky and lower volume opportunity than P2P transfers here in the US (and likely Canada in the near future).  I don't know how Square will make a buck off this product but I do know one thing...

Goodbye Paypal...its been nice to know you...

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