Photo-sharing service Snapchat has launched a new, photo-free use for its network: Sending money. The company announced a partnership with Square on Monday (Nov. 17) for a person-to-person payment service called Snapcash, Re/code reported.
The P2P service is part of an update for the Snapchat mobile app. The Android version was released on Monday, with an iPhone version to be pushed out soon, the company said.
To use the Snapcash service, a Snapchat user will first have to register a debit card for use as a funds source. The sender can then transfer money to any other Snapcash user by sending a private message consisting of the amount (preceded by a dollar sign) using the Snapchat mobile app and pressing an on-screen green button.
Square, which already offers a similar (but email-based) P2P payments service called Square Cash, handles the debit-card registration and stores the card information, processes payments and transfers the cash to the recipient’s debit-card-linked bank account. Snapcash is available to U.S. Snapchat users who are at least 18 years old, and requires a Visa- or MasterCard-branded debit card.
The deal gives Square potential access to Snapchat’s 100 million active users. Technically, Snapcash users will be opening a Square Cash account when they register a debit card, and Square will have access to all Snapcash payment data. Square’s logo will also appear within the app when Snapcash is used the first time. The deal is the first time Square has embedded its Cash service within another app.
The companies didn’t comment on terms of the deal, but Re/code reported that Snapchat is “likely” paying Square a small fee for each transaction it processes. Square Cash is a fee-free service to consumers.
Snapchat CEO Evan Spiegel said Snapcash isn’t intended to compete with P2P payments services like Venmo or PayPal, but just as an added service for Snapchat users. In practice, how big a payments player Snapchat becomes will depend on how many of those 100-million-plus users elect to use it for payments. For comparison, PayPal currently has 156.9 million active accounts, while PayPal-owned Venmo hasn’t released a user count. (Apple’s iTunes has 800 million accounts, but it doesn’t operate a P2P cash transfer service.)
Spiegel told Re/code that the idea for the new service came in May 2013, when Square was testing Square Cash. Square CEO Jack Dorsey sent Spiegel $25 via email. Spiegel replied to the message, “okay this is actually genius,” then sent a follow-up reply to Dorsey two minutes later: “hope you don’t mind I cashed in.”