Square Inc. (NYSE: SQ) has rapidly grown into one of the largest payment processing companies in the United States. As part of this rapid growth, the company has moved into new areas of the market. It now provides businesses with employee management, scheduling, business analytics and other services. According to its SEC filings, the company hit $17.9 billion in Gross Payment Volume during Q4 2017 and $17.8 billion in Q1 2018.

As a part of its growing clout in the fintech industry, Square launched a peer-to-peer (P2P) payment service in 2013 called Square Cash. The Cash App, a P2P platform made by Square, currently boasts over 7 million active customers.

On June 18, 2018, Square received a "BitLicense" from the New York state regulators, making it the ninth company to be granted one of these licenses.

Peer-to-Peer Payments

The United States' fintech industry is dominated by PayPal Inc. (NASDAQ: PYPL), Venmo LLC and Square, though Facebook Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc. (NASDAQ: AMZN) have all launched competitive P2P products. These services allow consumers to pay for a store's goods and services, pay bills and transfer money, all from a convenient smartphone app.

The goal of this industry is to reduce transaction costs for consumers and businesses while making payments more social and efficient. In practice, this means being able to send money to friends and family for free, or being able to buy a soda at the convenience store if you forgot your wallet.

How Square Cash Works

Square Cash does all these things and works with both businesses and individuals through an app available for Android, iOS or your favorite web browser. After linking a debit card to the app, individuals or businesses can start sending money where it is needed. One of the key differences between Square Cash and its competitors is that Square Cash moves money in and out of a users’ debit card account directly, instead of keeping cash with the service provider.

For example, when someone sends money from one PayPal account to another, that money stays inside the recipients’ PayPal account until it's withdrawn. With Square Cash, the same transaction will see the money go directly to the receivers’ debit card account linked with Square Cash. Square Cash claims that this process is usually completed instantly, though it can take one to two business days for certain banks. Note that Square Cash only works with debit card accounts, not directly with bank accounts or credit cards.

How Square Cash Makes Money

One of the company’s main selling points is that its service is free for individuals, and judging from the company’s fee schedule, that seems to be mostly true. Square makes most of its money from charging businesses fees for the services it provides, though individuals can also incur a 1% fee for expedited deposit services.

Since Square Cash is not separated from Square, it isn’t entirely possible to discern how much money this particular service generates for the company. From the company’s SEC filings, roughly $1 billion was processed through Square Cash in 2015, which seems like chump change to $17.9 billion in just Q4 of 2017.

For businesses that accept Square payments, fees start at 2.75% per swiped transaction and 3.5% plus 15 cents for manually entered transactions. The company also sells additional services to companies at various rates, including a loyalty program, payroll, and email marketing among other services. Square allows payments to be made in up to 25 different currencies, though it is unclear if it charges any fees or an additional spread on foreign currency transactions. It is important to note that this fee schedule existed before Square Cash launched and is not a part of the service’s website.


As an integral part to Square’s rapidly growing business, Square Cash has become a leader in the P2P payments ecosystem. The service itself is processing more than $17 billion on a quarterly basis and is expected to continue growing as it continues to offer free transactions for individuals. However, since the service is tied into Square’s overall business, it is hard to know how much revenue Square Cash itself is generating, if any. The company reported net revenue of $616 million in Q4 2017, and adjusted revenue of $283 million.

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