Snapchat moves into payments with Snapcash

by Nikhil Joseph 0

In an end to will-they-won’t-theyspeculation, Snapchat finally announced that it would be partnering with Squareto add a P2P money transfer feature to its wildly popular photo messaging app.

The deal gives Square access toSnapchat’s users, who send more than 700 million disappearing “snaps” a day.Snapcash joins other apps such as Square Cash and Venmo in offering people away to send and receive money quickly, such as when diners split a restaurantbill.

This is Los Angeles-based Snapchat’ssecond potential revenue-generating product in addition to advertisements,which debuted last month. The security of the debit-card numbers will behandled by San Francisco-based Square


As my colleague Ron Mazursky commentedin a blog post published today, this makes perfect sense for both parties.Snapchat has a massive and loyal user base, most of whom are below the age of24, but hasn’t yet quite figured out how to monetize this engagement. Square,on the other hand, has a rolled out a number of innovative payment solutions inthe last few years starting with its ubiquitous but unprofitable mPOS donglesto its wallet solution Square Cash that failed to take off due to lack of usertraction. Now Square has what it always wanted—a captive user base of millionsof Snapchat users. And Snapchat has a killer new function that it hopes willlead to actual revenues down the line. Will it work? There’s a good chance thatSnapchat may become the new Venmo. But that remains to be seen. Will users whountil now associated Snapchat with playful, risqué chats and pictures bewilling to also use it for completing financial transactions? Diversificationis usually a great corporate strategy to hedge against risk but there’s a limitto how far you can stretch your brand’s consumer perception. Ever wonder whythere is no such thing as Apple iCandy or Coca-Cola branded whole wheat bread?

Overview by Nikhil Joseph, Sr. Analyst, Emerging Technologies Advisory Service for Mercator Advisory Service

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