Cash App Business model and how it has boomed among P2P payment apps

Cash App is a peer-to-peer payment app launched in 2013 by Square, one of the pioneers of the fintech industry. Besides Cash App, Square also offers business in software and point-of-sale hardware.

While Square originally went public in 2011 as a payment processing company, the company has expanded its business model to include scheduling, employee management, and business analytics.

Square launched Cash App as a direct competition to Venmo and PayPal. Cash App has expanded its feature beyond peer-to-peer payments, allowing users to receive direct deposit payment and trade cryptocurrency on the platform. Most recently, Cash App has introduced a new feature that allows users to trade stocks commission-free within the app.

Cash App Business Model

Cash App can be downloaded for free from Apple’s App Store and Google’s Play Store. The app’s core functions including making payments and transferring funds to a bank account are also free. Cash App makes money by charging businesses to use their application and charging users transaction fees to use additional features.

Businesses who accept Cash App payments have to pay 2.75% every transaction. The payment can be made in two ways:

• An individual user uses Cash App to make an in-app P2P payment to a business.
• An individual user uses a Cash Card to make payments.

Expedited Transfers and Credit Card Payments

In order for quicker bank transfers, users will have to pay a 1.5% fee for every transaction. Standard transfers take around 2-3 days while with a 1.5% charge, users can send the amount to their bank accounts immediately.

For a 3% charge, users can also make personal payments using a credit card instead of their Cash App balance. Cash App needs to continue to shell out new features in order to stay relevant and stand out among its peers like increasing Cash App limit.

Bitcoin Exchange

By the end of 2017, Cash App allowed its users to use their balance to purchase and sell Bitcoin. When it was introduced, the service was free of cost. However, in late 2019, Cash App began charging its users as much as 1.76% for purchasing Bitcoin. Apart from the service fee, there is usually a 1% to 4% difference in what Bitcoin exchanges for and what individuals pay for it. Cash App factors these differences into the prices it offers its users and thus makes additional revenue on the exchanges.

The Future of Cash App

In a world moving rapidly towards digitalization, more and more people are shunning cash and employing digital wallets in their lives to make payments. Cash App is in direct competition with PayPal, which has a market capitalization of $114.8 billion. Moreover, there are also smaller P2P payment companies to worry about including Apple Pay and Google Pay, both of which come pre-installed on smartphones nowadays. Cash App needs to continue to shell out new features in order to stay relevant and stand out among its peers.

Recently, Square has launched two new Cash App features: On-demand Pay and Instant Payment. On-demand pay lets those who use the Square app for payroll to give their employees up to $200 of a paycheck ahead of time. Instant pay allows businesses to fund payroll immediately using funds from their Square account balance.

According to Square’s latest earnings reports, Cash App had more than 30 million user base in June 2020, which is a huge jump from 24 million in December 2019. While most of Square’s business got hit by the pandemic, Cash App remained on top of the businesses because of its features and the fact that it allowed users to receive their US stimulus checks.