Can Square Cash replace $1 trillion in checks?

Square Cash
Source: Square Cash
Square Cash

Back in 2013 Square Cash introduced a way for people to pay each other: its peer-to-peer payments service Square Cash, quite similar to the payments Facebook announced last week for its messenger product.

Today Square is taking its payments service to businesses, targeting the 13 billion checks that are written every year, amounting to more than $1 trillion. This is one way Square's looking to diversify away from its dongle card-reader, pivot away from the disappointment of its Square Wallet app, and reposition the company as a broader financial services provider for small businesses.

The cost? Square is charging 1.5 percent of the total to the business being paid. (The peer-to-peer version doesn't charge any fees). This is about half the 2.75 percent that Square's credit card reading app, Register, charges businesses. PayPal, in contrast, charges a 2.9 percent transaction fee for debit or credit card payments. (Here's a video explaining how it works.)

Square Cash for businesses is aimed at small businesses such as landlords, landscapers and dog walkers, who rely on checks for payments, and don't want or need credit card readers. Now, with Square's new "$Cashtag," they can be paid directly into their bank accounts, without the buyer or seller having to share addresses, phone numbers or any personal information.

The buyer just has to input the seller's "$Cashtag"—the dollar symbol plus their unique identifier into Square's "Cash" app or website—to pay from their debit card. Anyone can go to https://cash.me to set up an account. The first time visitors pay they input their debit card number, as well as a phone number or email address to set up an account. After that visitors just need to sign into their account.

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The idea is that $Cashtags won't just be valuable for traditional small businesses, but also nonprofits such as Wikipedia; $Wikipedia, $KhanAcademy and $RED are among the nonprofits that have already claimed $Cashtags. Plus, there's a new generation of artists and entrepreneurs with social media followings on everywhere from Pinterest to Instagram, which can accept payments by including their $Cashtag in their social media profile, without needing to share their mailing address to solicit checks.

This puts Square directly into competition with PayPal's Venmo, which reported over $900 million in payment volume in the fourth quarter of last year (it charges a 3 percent fee for credit cards and non-major debit cards). And of course Facebook just announced it is launching its own payments service. While Facebook Messenger payments will start off just for individuals, payments to businesses can't be far behind.

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