Starting Tuesday, Twitter founder Jack Dorsey’s mobile wallet payment system, Square, will revolutionize the way we exchange cash. The application will allow users to exchange money directly from one debit card to another free of charge. "Square Cash" lets users exchange up to $2500 in cash weekly through any email program instantly. While previous iterations of Square were meant for merchants, this is intended to be used peer-to-peer, for splitting checks or paying rent.
So far, Square Cash is available only in the U.S. and is only compatible with Visa and MasterCard but a larger rollout is assumed to be in the works.
This announcement only solidifies the idea that Smartphones are transforming into sleek wallets. And this change will be felt by everyone in the near future.
56% of American adults own smartphones and 34% of cell Internet users go online mostly using their phones. We use our phones to get directions, send emails, listen to music, to tweet, and take photos. So why not use them to pay for dinner, or pay back our friends?
Mobile payment systems are becoming more and more popular around the world. Americans will shell out about $37 billion in payments over their phones in 2013—and that number is rapidly growing. Global mobile payments are now projected to top $1.3 trillion by 2017.
A number of small and large American companies are attempting to make money from this trend. Google (GOOG) and eBay (EBAY) already have strong players in the mobile payment market but smaller companies like Clinkle, run by a 22-year-old Stanford grad, are also generating buzz.
While it’s incredibly convenient to pull out your phone and instantly pay for your Starbucks or send your friend the $20 you owe them, the market for these apps is getting crowded and therefore complicated. Jason Gilbert, Yahoo Tech editor, broke it all down for The Daily Ticker’s Aaron Task and explained what differentiates each of the biggest mobile payment apps.
1. Google Wallet
“Essentially you sign your bank account up to your Google or Gmail account and you can pay through your phone by bumping your phone up against the cash register. Now they’ve introduced a little button on your Gmail that you can click, enter in how much money you want to send to your friend, it’s just like a bank transfer,” explains Gilbert.
Google Wallet doesn’t currently charge merchants or users to access their application but plans to make money off targeted ads. Google wallet works with all major credit cards but only a limited number of stores currently accept the payment method.
Aside from the newly announced Square Cash, “Square has a new service called ‘Square Wallet’ which is an app that you can sign up for and just say your name to the cashier. The [store will] have a database that says you’re a Square Wallet customer and they charge your account,” says Gilbert. When you tell the cashier your name, a photo ID will popup on the screen allowing the cashier to confirm your identity.
Square may be most famous for its ‘Square Register’ accessory that pops into the audio jack of the iPhone or iPad and allows small business owners to accept credit card payments on the spot.
This app has “combined the newsfeed of Facebook where you see what everyone is doing with a mobile-to-mobile payment app. This too connects with your bank account and you can send and receive money to your friends. If you so choose you can write what you’re sending someone money for and it will show up in a newsfeed with all of your friends,” explains Gilbert.
Venmo was recently acquired by Braintree (a company owned by eBay) for $26.2 million.
“This is an enormously hyped app that’s not even out yet but it has the largest round of funding behind it of all time,” says Gilbert.
Richard Branson alone has pledged $25 million to the mobile payment app. “No one knows what it does yet, but what we think it does is mix Venmo and Square where you can connect it to your bank account and pay [both] friends and at the register and it’s all very beautifully designed.” The app already has a waiting list 100,000 people long.
So what’s behind this big boost in mobile payment services? “As more phones come out and as more trusted corporations start saying this is a very secure way to pay…and as more people start to use it I think you’re going to see it explode and enter the mainstream,” says Gilbert.
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