Square Woos Millennials With Cash App Coffee Rewards

In an effort to attract millennials to its platform, Square is offering a pilot program that gives its Square Cash Card customers a dollar off their coffee purchases. The effort could change millennials’ payment behaviors, MarketWatch reported.

Mizuho Analyst Thomas McCrohan wrote, “A $1 coffee reward is enough incentive to create habits, including migration of non-coffee spend volumes onto the Square Cash physical card. The long-term play is to use coffee rewards to drive habits, which in turn will result in more of the $2,946 spent annually on food away from home by millennials to be spent on the Cash Card.”

Customers can take the discount to “any establishment that mostly sells coffee and coffee drinks,” according to Square’s website. Through tests of the program, McCrohan believes this includes Dunkin’ Donuts and Starbucks stores.

While Square may lose money on the program, the company could take in $100 million in fees if just 5 percent of millennials began to use their cash cards to purchase food “away from home.” Square’s transaction costs could be minimal, as users of the app pay for their purchases with the balance already in their accounts.

The news comes as Square revealed that 7 million people used its Cash app during the month of December in 2017. According to Recode, the company disclosed the numbers in its quarterly letter to shareholders, explaining that the 7 million “active customers” either received or sent money using the Cash app during that month. People who only opened the app were not counted in the metric.

In addition, Cash customers spent more than $90 million during the month, with the No. 1 and No. 2 most popular merchants on the receiving end of Cash payments being McDonald’s and Walmart.

Recode pointed out that while the 2017 holiday season might have been responsible for the surge, money transfer services seem to be less seasonal than other payment methods, such as credit card spending.