The world is steadily moving towards a zero-cash future. In part, it’s already here in the form of numerous payment services that allow people to send and receive money in real time — no need for checkbooks or ATM cash withdrawals.
Some of these services, like PayPal, are popular internationally, while others are confined to local markets (WeChat in the Chinese market, for instance). But whether local or global, mobile payment platforms are changing how we use money in our daily lives.
The popularity of mobile devices has helped certain types of payment apps like Venmo and Zelle to grow quickly. Today, we want to look in detail at one other peer-to-peer payment service: Cash App (formerly known as Square Cash).
Cash App is a product of Square Inc., one of the largest payment processing companies in the US market.
The Cash App service allows friends to instantly send money to each other and allows merchants to accept card payments. In short, it’s a robust peer-to-peer payment solution with user-friendly interface. Sending money through Cash App is almost as quick and easy as paying with good old cash.
As the product of an established company, Cash App is part of a large ecosystem. Square’s products include payment and point-of-sale services as well as financial and marketing services. And with Square’s name recognition and reputation as a trustworthy company, Cash App didn’t have a hard time acquiring users after it launched.
Cash App is not the only software product Square has created. The company has a wide list of FinTech projects including Square Point of Sale, Square App Marketplace, Square Appointments, Square Marketing, and Square Payroll.
By releasing such a range of applications, Square has been able to create an ecosystem of complementary software products and has backed up that ecosystem with strong customer support. Square Cash is free when users are sending money from a debit card to friends and family.
The US FinTech landscape is dominated by a number of companies that provide payment services, including personal peer-to-peer payments: PayPal, Venmo, Apple Pay, Google Pay, Square. Other markets – such as the Asian market – often use these same international options plus their own regional payment systems. In this highly competitive environment, every new app that hits the stores has to clearly indicate what sets it apart and makes it better than other payment services.
What are Cash App’s advantages compared to its competitors?
Cash.app URLs by Square Cash let users send and receive money even if only one party has the app, which is convenient for businesses. (In other words, a customer can pay through Square Cash even if they don’t have an account.) This allows small-time brick-and-mortar businesses such as local flower shops to easily get paid and gain name recognition.
Square offers a virtual card called Cash Card, giving every user a Visa debit card number they can use to pay on ecommerce sites and at retail stores. Users can also easily add a Cash Card to Google Pay or Apple Pay as well as withdraw cash from an ATM (limited by $370 per transaction with a $2 fee).
Cash App allows for free international payments and currently supports money transfers between the US and the UK.
Cash App payments are processed immediately, while the Cash Out feature allows users to transfer money from a Cash App account to a bank account and choose the speed of money transfer. The operation usually takes 1 to 3 business days, but with Instant Deposit, users can get money immediately.
Cash App provides a fast and convenient way for small businesses and users to request and receive electronic payments using so-called $cashtags that are unique to each user. With $cashtags, money can be transferred even if a sender doesn’t have a Cash App account.
In Cash App, users can start investing with as little as $1. The app provides a simple interface for monitoring, purchasing, and selling stocks and Bitcoin.
The Boost feature allows users to save money when buying certain goods or services from certain categories or certain stores (i.e. 5% at Whole Foods, 10% at Taco Bell).
How does Square Cash ensure the security of their operations?
One significant concern all FinTech companies have to address at some point is the security of their service; all users of payment services want to know what’s being done to protect their financial data.
Read also: Core Elements of Data Security
Square Cash contains a number of security features that are designed to prevent fraud and breaches of sensitive financial data:
Security lock, which allows for Touch ID or PIN entry depending on the user’s choice
Instant notifications via email, text message, or push notification if suspicious activity is detected on a user’s account
Optional text message or push notification after each transaction
Customer support and fraud protection services, plus instant freezing of card spending in case a user loses a card
First level of payment card industry data security standard (PCI DSS) certification
Two-factor authentication with a one-time-use login code
PCI DSS is a set of security standards that were defined in 2004 by several major companies – Visa, Mastercard, JCB International, Discover Financial Services, and American Express. PCI DSS certification is a requirement for any company that processes credit or debit card transactions. This certification means that even though there’s no such thing as 100% safe digital transactions, transferring money with Square Cash is about as safe as using your Visa card at the supermarket. The fact that Cash App has this certification is already proof enough for potential users who may be hesitant to try this digital wallet for security reasons.
What monetization model does Square use?
Every financial software has to figure out a healthy balance that allows its service to gain traction and at the same time remain profitable. For money transfer applications, monetization is often a question of picking the optimal commission fee for different types of customers.
In this regard, Square Cash is uniquely positioned among its competitors for a number of reasons:
Started as a free app
As part of a big company, Cash App has a lot of financial backing and consequently had the opportunity to launch the first version of their service as a completely free app. This helped Square Cash gain initial traction.
Square also passed on the traditional model of monetizing similar services using paid ads. Square states that they have no plans to show ads to their users, even if the brand that wants to be advertised does business with Square. Square can afford avoiding ads because they want to draw users’ attention to how smoothly the service transfers funds.
Smaller companies that are not affiliated with financial corporations or banks might not have an opportunity to start with a free version and might have more difficulties finding a profitable monetization strategy for their P2P app.
Commission from payments
Companies like Square have multiple sources of revenue: transactions, software, and data products, SaaS services. Square Cash taps into the transaction revenue stream by charging commission for transactions:
Businesses that accept Square Cash online payments are charged a 2.75% fee per transaction when a user pays via the app or a Cash Card.
ATM cash withdrawals have a fixed $2 fee per transaction.
The fee for sending money from a credit card is 3%, while the instant deposit fee (sending money to a bank’s deposit card instantly without waiting 1 to 3 business days) is 1.5%.
Cash App also charges a service fee for Bitcoin transactions. As for stocks, Square doesn’t charge any service fee but charges a fee required by the SEC.
The numbers show that Square’s choice of monetization model has been effective. According to Square’s Q3 2019 Shareholder Letter, total net revenue for Cash App in the third quarter of 2019 was $307 million, or 25% of Square’s total revenue for the third quarter.
What does it take to build an app like Square Cash?
Square Cash, supported by Square’s security and name recognition, has grown rapidly. In February 2020, the number of Cash App monthly active users reached 24 million. As of today, Square Cash has clearly become one of the leaders in the world of P2P payment services.
On top of the technical difficulties involved in developing a complex application that can handle a lot of data and exchange it with banks, creating a product like Square Cash poses a number of other challenges.
What can you do if you want to develop an app like Square Cash but can’t commit to a complex and expensive project?
Here are a number of recommendations for how to get started based on the business models used by Square Cash and similar P2P applications:
1. Start with a regional market. Starting with a smaller market will give you a chance to find the optimal product–market fit and see how users respond to your service. This way you also won’t have to worry about competing directly with big players like PayPal right away. Not every peer-to-peer payment system has to go global to be successful: quite often, regional banks invest in developing customized P2P platforms just for themselves.
2. Security is one of the bigger pain points for financial apps. Clients can forgive slightly laggy performance or even a clunky UI, but they want to be absolutely sure that their money and their personal information are safe. Getting Payment Card Industry Data Security Standard certification will help you ensure that your service will be taken seriously and will have a good reputation. Design your app’s architecture with a constant focus on security and reliability.
3. Go with third-party APIs and services wherever possible. There’s little point in investing a lot of money right away into developing each separate technology feature from scratch if you aren’t certain how successful your product will be. Using third-party APIs is common practice for mobile payment system development. Third-party APIs can accomplish a lot of tasks; for instance, APIs such as Synapse let you create secure accounts, send payments, and manage compliance, while the Dwolla API gives you the opportunity to connect your platform to the US banking system.
4. If you’re building a standalone fintech app that’s not part of a bigger system, you might not have the luxury of ignoring paid ads as a potential source of revenue. Finding a monetization model for a new application can be tricky and will likely involve compromise. There’s nothing wrong with drawing revenue from several sources.
5. Invest in retaining customer trust: provide multiple support channels via online chats and email and make sure to respond to all requests and give detailed feedback. People don’t take kindly to a money transaction not going through and not being able to reverse it or resend it.
How much does it cost to create an app like Square Cash?
Creating FinTech software is always expensive, and it takes a lot of expertise to build a money-transferring app that’s as successful as Square Cash. We looked into what makes a peer-to-peer payment app safe and convenient for users and focused on the most essential features such an app should have. Here’s what we came up with:
The cost of developing an app depends on various factors, including the size of the development team, tech stack, and location of the dedicated mobile app developers. If you’re interested in building an app like Square Cash, get in touch with us and find out all the necessary details!