Square has big plans to extend its person-to-person payments product, Square Cash, to small businesses with a goal to rid them of having to accept checks as payment.
On Monday, the San Francisco payments startup announced that it will allow contractors and service professionals to accept money through a new product it calls $Cashtag. (Yes, the dollar sign is part of the name.)
With a personalized Cashtag, anyone can create a unique identifier—think of it like a digital address—that can be entered into the Square Cash mobile application. Cashtags can be posted on the web to let people know they can be paid through Square Cash, either from the Cash app or on the web at www.cash.me. Square says the target market for the new product is small businesses or non-profit organizations that commonly accept checks as payments or for donations.
For businesses who use Cashtag (and designate their Square Cash account as a business), Square will charge 1.5 percent of the total amount transferred to the payee. In contrast, Square’s card-swiping app, Register, charges 2.75 percent to businesses. Square Cash for consumers doesn’t charge a fee to the payer or payee.
In addition, as an incentive to attract for businesses to use Cashtags, Square will lift its transaction limit of $2,500 per week for businesses using the app. (Consumers will still face the limit.)
After Square’s high-profile deal with Starbucks (SBUX) ended—for about two years, the coffee purveyor accepted mobile payments using Square services—the startup has refocused on providing payments services to small businesses and adding disputed purchases protection, analytics, and instant deposits for merchants using its Register app. Square has also started offering cash advances to businesses through a deal with Victory Park Capital.
The looming question for the company is whether handling P2P payments for small businesses will be a meaningful revenue stream for the company, which faces competition from PayPal (EBAY) and others. Though mobile payments are booming, P2P payments represent the smallest piece of the pie, behind in-store payments and in-app payments. Consumers don’t want to be subject to the fees associated with these transactions, which are not a factor when paying with cash or check.
It’s also a space filled with competitors. According to Forrester Research, seventy-three percent of American adults who use the Internet and make P2P payments use PayPal. PayPal-owned P2P payments app Venmo has been growing fast, especially among millennials. Last year alone, Venmo’s total payments volume rang in at $2.4 billion. Square follows with total annualized payment volume at $1 billion, says the company.
Facebook just entered the P2P space with addition of a new feature in its consumer-focused Messenger product. For now, the social network has not expanded this to commercial payments.
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