Cash App is a mobile payment service developed by the leading financial technology company Square. Originally launched as Square Cash in 2013, Cash App allows users to transfer money to each other using an app. They can also use their smartphones to pay for goods and services or purchase Bitcoin cryptocurrency. Cash App is free to download and use for the average consumer who wants to send or receive money. Money is instead made through transaction fees for additional products, service fees, hardware fees, interest, and Bitcoin fees.
Cash App is a mobile payment service developed by the leading financial technology company Square.
Originally launched as Square Cash in 2013, Cash App allows users to transfer money to each other using an app. They can also use their smartphones to pay for goods and services or purchase Bitcoin cryptocurrency.
In late 2020, Cash App was worth $40 billion to Square alone despite strong competition in the P2P payment industry from Venmo, Apple Pay, and Google Pay. The popularity of Cash App has been fuelled by pandemic-related stimulus checks and frequent references to the service in hip-hop music.
The service also actively targets consumers who bank with traditional institutions. Through a weekly giveaway called Cash App Friday, the company entices new sign-ups by distributing cash to current users who enter a draw via Instagram or Twitter.
Cash App is free to download and use for the average consumer who simply wants to send or receive money. This freemium model is essentially a way to advertise paid Cash App services by creating trust between the brand and the consumer.
Money is instead made through transaction fees for additional products, service fees, hardware fees, interest, and Bitcoin fees.
Let’s take a closer look at these below.
Transaction, subscription, and service fees
The vast majority of Cash App revenue comes from transaction fees for various subscriptions and services
Fees are levied in a range of scenarios, including:
Instant deposits – for those wishing to instantly deposit funds from the app to a linked debit card, Square charges a 1.5% fee with a minimum charge of 25 cents. Standard deposits which take 1-3 business days are free.
ATM withdrawals – customers are charged a $2 fee for all ATM withdrawals if they do not have a direct deposit set up.
Credit card payments – when a user makes a payment using a linked credit card, Square will charge a further 3% to the transaction.
Bitcoin – to buy or sell Bitcoin on Cash App, a service fee of up to 1.76% based on market activity will be charged. An additional fee is also applicable based on price volatility across U.S. Bitcoin exchanges. This fee is typically in the range of 1-4%.
Hardware fees
If a business wants to accept Cash App as a form of payment, it must pay a 2.75% transaction fee to use the point-of-sale system Square Terminal.
This hardware fee is applicable for in-app consumer purchases and also in circumstances where a purchase is made outside the app with a linked Visa debit card.
Net interest margin
Cash App also makes money by lending the funds in user accounts to other institutions and collecting interest payments. This is known as the net interest margin.
Key takeaways:
Cash App is a mobile payment service developed by fintech company Square in 2013. The app is worth more than $40 billion to the parent organization.
Cash App operates on a freemium model for individuals who want to send or receive money. Instead, most revenue is derived from instant deposit fees, credit card payments, ATM withdrawal fees, and Bitcoin exchange fees.
Cash App also charges businesses a 2.75% transaction fee if they want to accept the app as a form of payment.
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Braintree
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
