Square is opening up its Square Cash quick-payment service, previously used only for exchanging money between individuals, to, well, almost anyone: just set up a user handle, called a $Cashtag, for you, your business, or your movement, and anyone with a debit card can send money straight to your bank account.
Vendors have an incentive to push customers to pay using Square Cash, which only accepts debit cards, because, as Re/code points out, Square only takes a 1.5% cut from the business end of the transactions using Square Cash (with or without a $Cashtag), which is below the 2.75% cut Square takes with its traditional (i.e. non-Square Cash) credit-card payment service. To send money to a $Cashtag, you must enter your debit card info and sign up for a Square Cash account.
The big improvement for entrepreneurs here is the $Cashtag, a simple way to market, brand, and accept payments. As Square touts on its site, a contractor could put his or her payment information right on a business card ($JoeContractor); a street musician could display a sign ($JaneMusician) next to the donation tin; or a group raising money for a cause could promote simply through social media (“Donate to $SaveThePuppies!”).
The opening of Square Cash beyond peer-to-peer payments is in line with Square’s big-picture refocus on wooing businesses, rather than consumers, which we saw earlier this month when Square announced new features that streamline its business support services.
As Re/code says, most of Square’s revenue comes from taking those cuts out of business transactions–so increasing the volume of transactions is crucial for its bottom line. Those transactional fees don’t end up making Square much money, even at the 2.75% cut that Square takes with its traditional merchant plan. As PayPal cofounder Max Levchin told Fast Company last year, those transactional fees will only decline in the future. This fact put Square in an existential crisis not too long ago as the company stared down the barrel of $100 million in losses, necessitating a step away from depending on per-transaction cuts and towards selling products and services based on all the transaction data it collects. This focus eventually led Square to kill its own nascent credit card last August, retreating from controlling both sides of the purchase to keeping whatever customers and businesses they could through improving purchasing convenience.
[via Re/Code ]