Snapchat and Square have teamed up to create a peer-to-peer money transfer system dubbed “Snapcash”. Snapchat said in a blog post announcing the new service, “The product you’re seeing today is fast, fun, and incredibly simple. After you enter your debit card, it’s securely stored by Square, who will swiftly process your payment and send cash directly to your friend’s bank account. Just swipe into chat, type the dollar sign, an amount (e.g. $11.25), and hit the green button.”
There are over 100 million active monthly users already signed up to Snapchat, but to send money to a friend you must be over the age of 18, a threshold that should exclude a good portion of the Snapchat user based.
Snapchat has already fallen prey to security breaches, leading many to become skeptical of the safety of the service. Earlier in the year, hackers leaked around 4.6 million usernames and phone numbers and posted them publically online. There was also a major photo leak involving tens of thousand users on Snapchat, some of which included nude photos.
Snapchat said, “We set out to make payments faster and more fun, but we also know that security is essential when you’re dealing with money. Square has a ton of experience in this area and our teams have been hard at work to make Snapcash a great experience for everyone.”
When creating an account, Snapchat users must first register for a Square Cash account. Bank account details are stored with Square, which has vastly more experience in the payments field. To give users more confidence in its service, Snapchat has agreed to be monitored by the FTC for the next twenty years.
Mobile payments is a huge growth area and upstarts such as Snapcash and Venmo will struggle to find a niche and compete well with established providers such as Square and Paypal. Instead of seeking direct competition, Snapcash and others may choose a “cooperative competition” model as it has with Square.
Specific users within a social community may feel comfortable using an integrated peer to peer payment service like Snapcash, taking friction out of their online experiences.Could this be the way Gen Z rolls? Square is for your parents, while Snapcash is for “us”?
