First Look: Square’s New Cashtags for Small Business & Non-Profits

There has been no shortage of major announcements in the payments space in the past few weeks.

  • Facebook added a “send money” option to its messaging service
  • Starbucks added pre-ordering into 650 northwestern U.S. locations in advance of a national rollout
  • PayPal acquired the platform upon which MCX is built on

And yesterday, Square launched an SMB version of its Square Cash, brilliantly named Cashtags. Any person, business, or non-profit can create a cashtag out of its name (first-come, first-served) at$yourname. Then to pay by debit card, users click on your cashtag, enter their debit card number, postal code, CVV and amount to pay. Space for an optional message to the business is also included. First time users also have to confirm their email address or mobile phone number, before the payment is sent.

For businesses, it’s not much different than using PayPal. But the setup is slightly less intimidating Square onboards new merchants gradually, so as to not scare them off before finishing the process. When I set up my original cashtag, all they asked was my email address or mobile phone number, which was subsequently verified. It was only later when I was playing with that app, that they hit me up for my full name and last 4 digits of my social security number.

The big difference is in pricing. Square Cash business recipients pay a 1.5% transaction fee (with no per-transaction flat fee), undercutting PayPal business account fees by about 50% (both Square & PayPal have free options for non-business person to person transfers). I sent a few bucks off to Wikipedia and it worked perfectly (see screenshot above).  As it should, the debit authorization showed up right away in online banking (see below, from U.S. Bank).

cashtag debit confirmation


FI Opportunities & Threats:

For financial institutions not actively involved in the acquiring business, here’s a chance to build ties between your business debit card and your small-business (SMB) customers, at little cost and with no cannibalization of existing revenues. The zero-cost approach is to simply educate your customers about this new option from Square. Since cashtags are available on a first-come-first-served basis, it would make a timely subject for an email, blog post, or online article.

A more involved strategy would be to incorporate Square Cash and Cashtags directly into secure online banking. While Square has not published an API to make integration easier, access to Square Cash could be added to your dashboard, even though it would still run through the Square UI.

The main downside for at least endorsing Square, and it’s potentially a sticky issue, is that Square Cash/Cashtags is part of a larger payment and lending business being built by Square. It’s possible, but not all that likely, that at some point Square could be considered a material competitor to your core business. However, if you are not in the acquiring business, you have already opened the door for others to provide payment services to your customers. Square is probably less of a direct threat than Chase, Wells Fargo or other major merchant acquirers.

And regardless of whether or not you steer customers to Square, you can mine debit card transaction history. Personal checking accounts with numerous Square and/or PayPal transactions are likely being used by someone with recurring revenues. That’s your first clue there is a potential new business banking customer in the mix.

Square Cash Nails P2P Payments

image It’s been six months since we handed out an OBR Best of the Web award (archives; see note 1). Since then, many new enabling technologies and promising applications were launched. But with every passing year, it gets harder to raise the bar with a new digital financial product.

image But Square did it this week. The company took P2P payments — which PayPal commercialized in 1999 (see last screenshot below) and CashEdge/Fiserv bankified in 2009/2010, and which Google simplified in May — and distilled the payment scheme to its essence. Just email money directly (via debit card) from any client, web, mobile, tablet or any other email-enabled device (or from the Square mobile app). No third-party accounts needed, no login, no challenge questions, no selecting your payment method, no navigating various fee structures. Just send payment like you would any other email by adding a cc to Square. 

And amazingly, neither the sender nor recipient need be preregistered with Square. All it takes to send or receive small amounts ($250/week) is a U.S. based MasterCard or Visa debit card number, expiration date and ZIP code (see third screenshot; note 3). And once you’ve entered that the first time, you can literally send a P2P payment in two or three seconds (assuming you were already in your email client).

It’s hard to imagine P2P payments being any simpler. And Square is doing it all for free.

The biggest hurdle, as Walt Mossberg pointed out in the Wall Street Journal, is trust. The system is so easy to use, that it almost doesn’t seem possible. The other limitation is that users can register only one debit card per email address. There is no way currently to substitute a different card.



Since this is Square (fintech’s Apple), the design is gorgeous and the user experience is outstanding (Jim Marous breaks it down here). But the pundits are scratching their heads a bit about why the company launched a service with negative margins (note 4) that isn’t solving any major consumer headache and is disconnected with its consumer wallet and Square Register-acquiring business.

I think they are doing it to get millions of debit cards registered with their service. Then when new customers show up at a Square merchant, the company will try to switch what would have been a credit card transactions over to debit. This could potentially save gazillions in interchange, especially when debit price controls are expected to lower the interchange into sub 10-cent-per-transaction territory. 

But how they accomplish this integration is still a mystery. The company is so far silent on the end-game for Square Cash. 


Financial institution opportunities

Since Square is paying interchange to debit card issuers, financial institutions should be neutral about this service (note 3). Sure it takes P2P payments out of your control, but if your debit card is linked to the service, it increases usage. For those with a fee-based P2P offering such as POPmoney, Square Cash is a competitor, but with its transaction limits and other consumer uncertainties, it’s not on equal footing and initially shouldn’t be a huge threat.

In fact, banks and credit unions might consider integrating Square Cash directly into online/mobile banking. A script could write the payment email and send it directly from online/mobile banking. The primary drawback would be the confusing email confirmations from Square and the initial debit card signup on the Square page (screenshot #3), so it would take some customer education. But once customers got through that, it could be a minor profit center (see caveat, note 4).


The simplest P2P payment process in the world

Three steps:
1. Choose email address from contacts (or type in)
2. CC
3. Type amount in subject line

Note: A message in the body is optional. It can just as easily be left blank.


Square customer announcement (2 PM, 17 Oct 2013)
Note: In this email to an existing Square Wallet customer, the company pushes users to download its new standalone Square Cash app


Signup/application process (webpage)


PayPal “beam money” interface at its 1999 launch (15 Nov 1999)



1. Since 1997, our Online Banking Report has periodically given OBR Best of the Web awards
to companies that pioneer new online- or mobile-banking features. It is not an endorsement of the company or product, just recognition for what we believe is an important industry development. In total, 90 companies have won the award. This is the first for Square. Recent winners are profiled in the Netbanker archives.
2. In a Quora post, Brian Roemmele estimates Square pays between $0.10 to $0.25 per transaction to MasterCard or Visa and Chase, its acquiring bank (and Square investor).
3. Recipients can also deposit directly into a bank account if they don’t have a debit card.
4. It should be a net positive to the bottom line, unless there are unintended consequences, such as customer support or increased fraud.
5. For more info on peer-to-peer payments (P2P), see our Online Banking Report issue devoted to the topic (Dec 2009, subscription).

Mobile Monday: Square Wallet Enables On-the-Fly Tips & You Can Change Your Mind Later

imageSince much of my week revolves around reading and writing in various coffee shops around Seattle, I make sure to tip the barista so they don’t get annoyed with me using their wifi for an hour or two.

Tipping is very easy when paying with cash. You can easily drop the change in the jar. But with cards it gets trickier. With old-school signature system (i.e. mag stripe), it’s a little more time consuming, adding a tip amount and total, but still easy enough.

But with the move to contactless, no-signature below the floor (e.g. Starbucks) and many EMV transactions, the only way to leave a tip is to dig cash out of your pocket. But that kind of defeats the convenience of contactless. 

Maybe since it got it’s start as a POS device for small merchants, Square’s payment app, Wallet, had tipping built into it from the get go. As soon as the your wallet “pay by name” transaction is authorized, a message pops up on the iPhone lock screen, offering the opportunity to tip (see inset above).

Swiping the message brings up the transaction within Square Wallet, where you can choose your tip amount. The merchant can specify tip preferences by dollar amount or as a percentage of the transaction. The coffee shop I visited this morning offered $1, $2 and $3 choices for the tip. Those seem a little on the high side for a business with a $4 average ticket. Unfortunately, there is no way to override the choices and choose a different amount.

The app even allows you to go and edit the tip (see below). I’m not sure how long the “edit window” lasts, but you can certainly change it while you are waiting for your order.

Bottom line: The mobile wallet era will usher in a number of new payment behaviors. Tipping is just the tip of the iceberg.


Square Wallet tipping function (1 Feb 2013)

image       image

Mobile Monday: Square Wallet Provides a Sneak Peek at the Future of Proximity Payments

image We’ve used Square to accept payments at Finovate events for two years and have had an overall good experience. And recently, when our name-brand merchant acquirer of 17 years partially shut off our account for giving them too much risk-free business (a subject for another post, once I calm down), Square saved us by happily accepting our CNP volume with its fat 3.5% fee.

But this post is about the other side of Square’s two-sided market, its mobile wallet for consumers. I’ve already written about Square’s gift card option launched right before the holidays, but I hadn’t used the wallet for day-to-day charges.

In surveys, consumers don’t yet see the value of a mobile wallet. Mobile payments are looking to replace a plastic-card system that works very, very well. And who’s costs, so far, are mostly hidden from consumers (note 1).

Rewarding Usage


Here’s why Square is better than plastic. And it’s not because you can pay with your name, which is nice, but a little unsettling for both customer and clerk. It’s the built-in rewards. And to a lesser extent, stored receipts/records (can you say PFM?)

We Americans are absolutely enamored with getting something for free. In total, we’ve joined more than a half-billion rewards programs (see inset, note 2). And it crosses all demographics. Have you seen how the billionaires’ eyes light up on Shark Tank whenever someone offers them a free cupcake or cup of frozen yogurt? 

But we’re also lazy busy and few people want to carry a wad of punch cards around in their wallet/purse to earn rewards at local retailers. Plus, the cards are mixed blessing for merchants. The loyalty is nice, but merchants are mostly giving free stuff to regulars who would pay for it anyway. Paper punch cards just don’t do enough to convert people into “new” regulars.  

image This is where Square shines. When you use its wallet, a virtual punch card is automatically started for you (note 3). And when enabled, the next time you are near the merchant, Square will automatically remind you (via popup message) to come back and buy from that merchant. And even if it’s six months later, you get a second punch on that virtual card. And if all goes well for the merchant, they have incremental sales and you are well on your way to a complimentary mocha.

And all your previous transactions, with full itemized receipts, are available within the Square app (see left). It’s truly the future of payments available for a sneak peek today. I highly recommend giving the Square Wallet a try.



1. It’s also hard for consumers to answer questions about something they don’t really understand. It’s like asking someone in 1997 if they’d like to have their music purchases stored “in the cloud.”  10% would say sure, 10% would say I don’t know and the remaining 80% would choose the other options at random (but 100% would say WTF to themselves).
2. See our report on card-linked offers (Feb. 2011, subscription).
3. Starbucks does not currently support loyalty options via Square, but they are coming. Starbucks has $25 million invested, so they want Square to shine.

Square Expands its Payments Footprint with Virtual Gift Cards

imageAs the first billion-plus payments startup since PayPal, I’ve been looking forward to watching Square deliver on those hefty expectations.

We got a glimpse today of where it’s heading as the company rolled out virtual gift cards. That’s a business with as much potential as anything it has done to date (note 1). 

And it’s available now at any of the 200,000 merchants that accept the Square Wallet.


How it works

Square mobile app with Gift Card option Consumers can use their Square Wallet app to purchase a virtual gift card ($10 minimum; $1000 max) for any Square merchant. It can be sent immediately to any email address right from mobile app, which is integrated with iPhone contacts.      

As show in the inset, the gift card option is shown under each merchant’s "page" within the Square Wallet app (above the fold).

Square holds the funds until redeemed. The virtual card can only be used by the recipient at the designated merchant using Square’s processing services. In the event that the merchant stops taking Square, the funds will be cashed out and placed in the recipient’s Square wallet for use at any other Square merchant.

Recipients can potentially redeem in three ways, but the last two options only work for merchants that support bar-code scanning at the POS:

1. Square Wallet app
2. iPhone Passbook (if merchant accepts Passbook)
3. Printing or displaying the QR code sent in the original email to recipient (if merchant supports QR code scanning)

If the recipient does not accept the gift card within 90 days, the money is returned to the sender.

So far, there are no fees or expiration dates for the gift cards. But the company must comply with a thicket of state rules on abandoned property and escheatment, so dormant cards are not pure profit unless Square institutes some type of inactivity fee down the road (note 2).

Bottom line

While messy, gift card issuing is a great business that offers numerous monetization avenues (note 2). It demonstrates how potentially lucrative it can be to be both the transaction acquirer and wallet/card issuer. That’s what’s sending Square’s value to the stratosphere. 


1. Email from Square to the gift card recipient


2. The Gift Card "wrapper"
Note: This is one of four designs the sender selects from


3. The Gift Card then needs to be "saved"


4. Non-Square customers are prompted to open a Square Wallet account
Note: For those that don’t want to open a Square account, an "print" option is offered (at bottom of screen), but the merchant must support bar-code scanning for that option to work (see next screenshot).


5. If the merchant does not support bar-code scanning, the gift card can only be redeemed through Square Wallet



1. Here are the current Square business initiatives:

  • Merchant acquiring
  • POS systems
  • Merchant analytics
  • Mobile wallet
  • Merchant discovery/offers/ads
  • Starbucks relationship
  • Merchant loyalty business

2. Currently, Square tells users in the app that "Gift cards through Square have no fees and never expire." So, it doesn’t sound like they’ll be monetizing with inactivity fees anytime soon. 

The iPad-Enabled Checkout Experience at the POS

The Hideout Coffee House in Austin

A few week ago I spent the weekend in Austin eating BBQ, watching my alma mater get crushed by the University of Texas, and sampling the Sixth Street ambiance.

But the highlight for me was the The Hideout Coffee House. Not only did it have great coffee and eclectic furnishings, but card customers could pay via Square through an iPad mounted in a novel wood stand (see inset; it’s not possible to see well, but the ipad stand is on the counter at left).

The barista took my card and swiped it through the Square reader, which was supported by a wood guide (see similar unit left from Tinkering Monkey). Then he flipped the case over 180 degrees so it faced out towards me (see below).

Tinkering Monkey iPad holder at the POSI selected one of the large buttons for a preset tip amount and then once more to have the receipt emailed to me (I only had to enter my email the first time).

It was easier to use than most in-lane POS readers, even contactless ones, because the barista actually did the swipe. It eliminated the uncertainty about when I should tap/swipe or whether it worked or what I should do next. And I loved being able to put a tip on the card with the push of a button rather than writing it on a piece of paper or digging for change. 

Tinkering Monkey swivel ipad caseBottom line: Eventually payments will be made via proximity and settled in the cloud (my mobile will know I’m in the store and will automatically pair me to the store’s POS). But there is still a long transition period ahead.

Tablet/smartphone card readers are a great interim step for smaller merchants (note 2), especially with the price wars waging at the point of sale (note 3).

Related: And banks, even though you don’t have the POS issue, you can equip your frontline staff with iPad-powered sales tools (note 4). 


1. On one of the Austin freeways, I also saw a billboard for the ISIS pilot. But I didn’t see any merchants promoting it. 
2. And some bigger ones. And of course, the 20,000-store Gorilla, Starbucks, is partnering with Square, though it is unlikely they’ll use iPads at the point of sale.
3. Bank of America recently jumped into the game matching Square’s 2.7% discount rate.  
4. Barclays just bought 8,500 iPads to equip its branch sales staff (Financial Brand post).

Square Looks to Have Secured the Domain

image Evidently, the owner of the domain “” drove a hard bargain. How else could you explain a billion-dollar tech company, Square, using a domain name with “up” in it <>?

Dorsey’s Square had all the Google juice around the word, so it wasn’t likely causing any lost sales. But for credibility, there is no choice but to own the basic .com version of your brand. (Plus, they would hate to get confused with the board game of the same name.)

It may not yet be a done deal. I don’t see any confirmation of a sale on the Web. is currently being redirected, very slowly right now, to  And the  Whois record still shows that is owned by Square Enix Holdings Co. Ltd. in Tokyo, the makers of the popular video game, Final Fantasy. 

Square for the Holidays

image It’s not easy packaging banking products as holiday gifts. Prepaid gift cards are an obvious exception, though few banks actively market them online. And ING Direct’s Sharebuilder has for years sold a beginner’s investment package that’s intended to be given to kids or grandkids (see Wells Fargo/Sharebuilder 2002 holiday email below).

This year, Square joins that short list with a gift-wrapped box containing its iPhone/Android dongle, used to swipe credit cards. You can order 1, 2 or 3 packages online at a cost of just $1 each for the gift wrap. The dongles are sent to the buyer who must distribute.

I learned about it in an email right before the Thanksgiving holiday (screenshot below).

Bottom line: While recipients may be a little less impressed once they find out these dongles are free online, overall I love it. It’s really the payments advice doled out when giving the package that can make it special. 

Good idea and great email/landing page design: A


Email received (22 Nov 2011)

Email from square promoting the "gift of square"

Landing page (link)


Wells Fargo/Sharebuilder email from Dec 2002 (post)

Wells Fargo/Sharebuilder email from Dec 2002


Note: We cover email marketing, financial website usability, payments and much more in our subscription publication, Online Banking Report.

Square Updates its Merchant Platform

image In 15+ years of accepting credit cards, there have been few notable communications from our acquiring bank or payments gateway, other than normal transactional messages (note 1). Square looks to be changing that with a focus on merchant (and end user) experience.

For example, today I received an email outlining Square’s latest platform enhancements (see first screenshot). The message included an enticing Open for Business with an invitation to watch a 70-second video outlining enhancements to its merchant platform, including built-in rewards capabilities (note 2). 

The company has grown quickly. Basically starting at zero at the beginning of the year, they are now doing up to $11 million per day in card volume. More impressively, they are up to 800,000 merchants. Assuming a $65 to $70 average ticket, that’s around 150,000 transactions per day, or 4 to 5 million per month. But that also means the average merchant is only doing 1 transaction every 5 or 6 days. 

imageAnd the user experience is far from perfect. Square has suffered growing pains as it learns to manage a business fraught with fraud and uncertainty. We tried to use Square at Finovate last May and couldn’t get transactions authorized, apparently due to tight account limits in force then.

Four months later at FinovateFall, most transactions were authorized, much to the delight of attendees who used it. But unbeknownst to us (note 3), the money just sat in the Square account waiting for us to confirm our bank account. One small test-transaction had been sitting there since May.

Bottom line: The company flat-out does a great job with design and UX, very Apple-esque. I expect to see a lot of innovation out of Square given its funding, valuation, and celebrity founder. The promise of turning transaction receipts into a dynamic communication is especially interesting (previous post).


Email from Square (received 1PM Pacific, 15 Nov 2011)


Landing page (not logged in; link)



image1. It could be that I’ve simply forgotten messages received years ago. But I can say for sure that there have been very marketing/customer service messages, because I pay attention to them. My acquirer is not one of the major players. 
2. TechCrunch has a good rundown of the new features.
3. In fairness to Square, they did mention on the merchant receipt that we needed to verify the bank account. But during the heat of the conference, I never noticed that. Click on inset to see the company’s transaction receipt (highlighting mine).  
4. I wonder what it will take to convince Japan’s Square-Enix Holdings, creator of Final Fantasy (video game) to part with the domain name (which is currently unused). 

WV United FCU Offering Both Square and Dwolla Payments

imageDuring an an onstage interview at The Wall Street Journal’s AsiaD conference, Jack Dorsey said he was working with banks to distribute Square readers/accounts directly to bank customers.


Since it was Honk Kong, I was thinking OCBC or HSBC. But it turns out the first financial institution (note 1) to take Jack up on his offer, is WV United FCU, a 5,000-member CU headquartered in Charleston, West Virginia. If that name sounds familiar, it’s because it was the first financial institution in the world to implement mobile remote check deposit in August 2009 (previous post). WV United is also featuring Dwolla P2P/alt-payments on its homepage.   

  • Square: The CU is promoting Square on its home page (see screenshot #1 below). Square is the first of five promotions that rotate across the top (see also Dwolla below). The promotion features the 2.75% merchant rate and uses the @square Twitter feed to make it more interesting. The landing page invites members to signup for Square and redirects them to the startup’s webpage. It doesn’t appear there are any official affiliate arrangements. But Square allows payments to be transferred to any bank account, so WV United members can have the proceeds automatically deposited to the CU account.
  • Dwolla: The Dwolla connection is more integrated, with a co-branded online account opening page (screenshot #4). There is also more info loaded onto the CU’s page including a short video, the @dwolla Twitter feed, and a features/benefits section.

Bottom line: No one is going to accuse 11-employee WV United FCU of not keeping up, innovation-wise, with the big banks. In fact, it’s setting the pace in some areas, albeit in a more "bolted on" fashion (note 2). Granted there’s little, if any, direct revenue from these efforts. But they also require no infrastructure investment. So, if they keep members satisfied and employees excited, then it’s a win.


1. WV United FCU homepage (14 Nov 2011)
Note: The credit union leveraged Bank Transfer Day for another 10 days (lower right). Smart.

WV United FCU homepage includes Square promotion

2. Landing page for Square promo (14 Nov 2011, link)
Note: Square Twitter feed on right

WV United FCU landing page for Square promo

3. Landing page for Dwolla promo (link)

Landing page for Dwolla promo

4. Co-branded online account opening (link)

WV United CU and Dwolla online account signup

1. They are the first that I’ve heard of. There could be others linking to Square in a similar fashion.
2. When I say "bolted on" I mean that the experience isn’t integrated with other WV United online offerings. Integrated is best, but bolted on is a good way to test the market and keep costs down.
3. For more info on P2P payments and other topics, see our subscription service, Online Banking Report.