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Square Cash: looks good but there’s a catch

I finally got around to taking a good look at the Square
cash announcement today.

If you didn’t spot it, Square announced last week that you
can send cash to anyone via email for free. 
All you need is to provide your debit card details and then you send an
email to the payee with the subject line stating the amount and cc cash@square.com.  When the payee receives the email, they enter
their debit card details and the money is moved.

Square cash

That’s all there is to it.

It takes seconds and it’s done.

You can send up to $2,500 a month to friends via Square Cash
or $250 a week to any email address.  Once
signed up, you just need to put cash@square.com
on the emails thereafter and away they go. And your money too.

You can also link apps on Android and iPhone to get alerts
when cash is sent and received too.

And the best bit is it’s free.

Square cash

This last bit is the most startling piece for me, as Square
is not charging any fees for the transaction.

How does it make money?

I guess, like Twitter and Facebook and Google, it starts with
the idea and , over time, funds itself through ads.

So you send your cash and your friend gets an ad saying, “spend
that $250 you just received on a new phone”.

Right now, Square Cash is purely for US currency debit cards
(when will they open overseas?), and there’s one big question that Quartz raises.

Can you trust Square Cash? 

They spotted that Square clearly articulates that it will
not be liable for any fraudulent transactions, even though they assure Quartz
that they are safe and use algorithms to ensure fraud does not occur.

The thing is that, if it did occur, Square provides no
reimbursement or guarantee.

It is this last bit that intrigues me about human behaviour,
as banks believe they are trusted because they provide a guarantee.

If you lose money, you get ti back.

In the UK, you get up to £85,000 back*. 

So let’s play this out.

You start using Square, you start to trust it, so you start
to transfer more and more money through it.

Then you lost $2,000 and have no compensation or recompense.

Is that fair?

What about Google Gmail or other services?  Do you trust them even though there is no
deposit guarantee or cover?

Over time, that’s the reason why Square and Google will join
some form of guarantee scheme.

In the meantime, Square Cash is a great innovation.  You just need to be a wee bit careful with
how you use it.

Take note from the Square Wallet User Agreement:

15. Security.

We have implemented
technical and organizational measures designed to secure your personal
information from accidental loss and from unauthorized access, use, alteration
or disclosure. However, we cannot guarantee that unauthorized third parties
will never be able to defeat those measures or use your personal information
for improper purposes. You acknowledge that you provide your personal
information at your own risk.


* Most people think this guarantee is £100,000 in the UK
btw, but it’s €100,000 not £100,000. 
Hence it was translated into UK cover as £85,000.




About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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  • Rupert Lee-Browne

    Chris, a very pithy piece as always. And you ask the right question – what happens when something goes wrong (as it does)? The low cost/no cost model can be very attractive but a business needs to make sufficient revenues to cover the cost of providing some form of customer service when Mrs Miggins’ money goes missing. That service can be made super-efficient through the application of tech but, in turn, that tech needs to be paid for. We have seen and will continue to see a rash of new entrants to the market offering ever-cheaper products (witness Transferwise with their so-called peer-to-peer model) but without superior customer service or a sure-fire guarantee these models will not ‘cross the chasm’.

  • David Steed

    The obvious problem with this scheme is that it is a card fraudsters dream. They can set up accounts with stolen card details and send money to themselves (cards obtained with fake identities). Square users are not necessarily the victims; it is the rest of us that will fall prey. Square cannot absolve themselves from this risk; the person who has had their card details stolen is obviously not at fault and the fraudster will have walked away with the money. I can’t see how they won’t pick up the tab if they don’t who will?

  • > This last bit is the most startling piece for me, as Square is not charging any fees for the transaction.
    They will add a fee when they have all the people in and used to it? That’s how I would do it.