Square Cash is a study in simplicity. This mobile app, available for iOS and Android, boils a complex process of electronically sending a friend or family member money into a remarkably simple, seamless series of taps. In two days, your recipient has his or her funds. Yes, two days. As in, faster than ACH.
The pricing model is fairly simple too—free. Free to send or receive money. The price, or lack thereof, leads to a skeptical glance at the garish green screen that looks more like a Swiss-designed IKEA calculator than a banking tool. Design of this caliber is not cheap. Banking transactions are not cheap. Finding a way to move money faster than conventional methods is not cheap. Securely (I hope?) storing my debit card number is not cheap.
So what is Square doing? Is Jack Dorsey’s media darling gathering press and praise at the expense of sound strategy? Or, is Square Cash more than the very few screens that meet the eye?
|“While Square Cash is still very new, the combination of fast, free and easy seems likely to win over users and add to Square’s increasing population of users with debit cards on file. That growing list of users may, in turn, attract merchants looking for lower interchange fees.”
—Joseph DeSetto, Emerging Payments Blogger
The trick, if we want to call it that, to Square Cash is that the transacting parties must enter their U.S. debit card information. No other nations are currently supported. No credit cards, prepaid cards or gift cards either. (Square confirms that reloadable prepaid cards are not accepted.) In addition to Square’s due diligence and that of the issuing banks, there is, at least in theory, no way to anonymously use this app. Square is also not in the position of an intermediary or clearing house, as the app sets in motion a direct transfer.
Square Cash is an extremely slick, zero friction way for Square to collect debit card information. As the U.S. leans toward debit cards, and interchange fees have dropped for debit transactions, Square appears to be working toward millions of debit cards on file. In the same way Instagram is worth more by doing less than original Facebook (and, thus, was bought by the latter), Square Cash does not accept multiple forms of payment/funding like its predecessors PayPal or Apple. Instead the fast, simple app is focused on debit, which should help position the company for a generational shift away from credit cards. Preparing for increased use of debit cards also is key to feeding Square’s core POS product.
Of course, all this speed and simplicity isn’t without its concerns. One report claims one of Square’s processes, along with the more standard uses, is basically an intentional, clever misuse of a standard network API meant for refunds, allowing speed of transactions by refunding what was never purchased. According to the source, a developer posting on Quora, there is no easy way for a user to audit money sent or received with Square Cash since a P2P transaction is recorded as a purchase refund. In Square’s defense, it disclaims use of its product for business. But, in today’s world of freelancers and “soloprenuers,” any product that transacts money inevitably will be used for business, so the developer’s concern may be legitimate.
Accounting principles notwithstanding, Square Cash is very seductive and becomes more so with each use. You tap send. If you send money to a user that already has entered a debit card, the recipient does nothing to accept the money. Money appears in two days in his bank account. The app recently added a Request button too, so you can ask other users for money that will appear in your account just as easily.
While Square Cash is still very new, the combination of fast, free and easy—a time-tested formula for a variety of products—seems likely to win over users and add to Square’s increasing population of users with debit cards on file. That growing list of users may, in turn, attract merchants looking for lower interchange fees. It’s a long-term play that likely will be expensive to Square as long as it remains free, but it seems that Square Cash ultimately could pay off.
Joe DeSetto is a frequent contributor to Paybefore as an emerging payments blogger. He is the program director of the Mobile Development Bachelor of Science degree at Full Sail University and the author of The Business of Design. Joe previously served as chief technology officer for two mobile startups. He can be reached via his Website desetto.com.