‘Square Cash’ Joins Crowded P2P Field (Oct. 16, 2013)
Square Inc. is wading into the crowded U.S. P2P field this week with Square Cash, taking a somewhat unique debit card-based approach versus competitors by enabling Visa and MasterCard debit cardholders to send funds to each other free of charge via email. Senders put the dollar amount of the funds they wish to send in the subject line of an email and copy firstname.lastname@example.org as an additional recipient. The sender then receives an email requesting his debit card number, and funds are sent to the recipient, who must register for a Square account and link a card to receive funds thereafter. Funds land in a recipient’s debit account within two business days, which is slower than most rival P2P services that promise immediate delivery, including PayPal Inc., as well as about 200 U.S. banks with various P2P offerings and Fiserv’s Popmoney. PayPal enables free P2P from one PayPal account to another; there is a fee for using a payment card. Many banks offer P2P services free, sent from account to account. Google Inc. offers free P2P via desktop-based e-mail from Gmail accounts or mobile devices via Google Wallet as long as it’s linked to a bank account; all Google P2P payments funded by cards carry a 2.9 percent fee.
Customers may send up to $250 per week via Square Cash; Gold Status users may send up to $2,500 weekly by providing a mobile phone number and linking a Facebook account or providing their name, date of birth and the last four digits of their Social Security number. A Square Cash app for iOS and Android devices also is available, and Square says it verifies each Square Cash e-mail to authenticate that it comes from a legitimate sender.
Observers say Square seems willing to subsidize the estimated cost of 10 cents per Square Cash transaction to bring more Square accountholders aboard who link a payment card, a la Square Wallet. But waiting two days for payments to process is an “interminable delay” for anyone who needs cash fast, according to Larry Berlin, who follows Square Inc. for Chicago-based equities firm First Analysis Inc.
While U.S. consumers still haven’t broadly embraced P2P, Square’s strategy of expanding its user base by having individuals receive a payment via Square is smart, James Wester, global research director for IDC Financial Insights, tells Paybefore. “Do it in large enough numbers and that can become a ubiquitous network,” he suggests. Confining Square Cash to MasterCard and Visa debit cards could limit expansion, he notes, and some consumers may worry about fraud and phishing. “If recipients treat Square Cash like they do e-mails claiming they have funds in a Nigerian account somewhere, then it certainly reduces its utility,” Wester notes.