Friday , March 29, 2024

Snap Will Pull the Plug on its Snapcash P2P Service

The crowded peer-to-peer payments market will soon become a little less crowded with the impending demise of Snap Inc.’s Snapcash service.

Snapcash, which runs on Square Inc.’s P2P payments technology, will end Aug. 30, according to TechCrunch. The Silicon Valley news service said over the weekend that it discovered a “deprecation message” about the closure buried in code for Snapchat’s Android app. A spokesperson for Venice, Calif.-based Snap confirmed the message and said users would be notified, but did not give a reason for the closure.

TechCrunch speculated that one reason may have been that a Twitter search showed some users employed Snapcash for sales of erotic content, which presented a potential public-relations problem. But certainly the difficulties presented by the P2P market itself, which so far generates little revenue from users, played a role. The current dominant players are the bank-backed Zelle service and PayPal Holdings Inc.’s Venmo, but other contenders include Square’s own Square Cash, Apple Inc.’s Apple Pay Cash, and Alphabet Inc.’s Google Pay.

San Francisco-based Square, which is expecting annual volume on its Square Cash card, which is linked to the Square Cash App, to hit $1 billion, didn’t comment directly on Snapcash but said in an emailed statement that “with more than 7 million monthly customers, Cash App continues to see strong growth, while delivering utility and flexibility for individuals’ money. We continue to focus on building new features that address the financial needs of our customers as we work to expand financial access for all.”

Snap was founded in 2010 as Snapchat and distinguished itself by enabling users to send through its smart-phone app photos that vanished within seconds after the recipient viewed them. Snapchat quickly became a favorite communications tool for teenagers and young adults. The company began adding various other services, including Snapcash in 2014, shortened its name to Snap Inc. in 2016, and went public in March 2017.

Sarah Grotta, a debit analyst at Maynard, Mass.-based Mercator Advisory Group Inc., says it’s too early to tell if the end of Snapcash signals the beginning of consolidation in the P2P market, a market in which some providers are turning to merchants to generate revenues.

“It at least points to the fact that payments require real attention and focus, and if not executed well can detract from the core business,” Grotta tells Digital Transactions News by email. “What might have happened with Snapchat is that they found the security requirements, the customer service, and the use of P2P transactions for unintended purposes has created too much of a liability and is requiring more support than expected. P2P on its own doesn’t generate revenue. Snapchat has been cutting back on staff and implementing other cost-saving measures, so perhaps dropping Snapcash was a part of their efforts to boost efficiencies.”

Snap’s business model may not have been optimal for P2P payments, according to another payments researcher.

“The transitory nature of Snapchat doesn’t lend itself to payment in general, and more specifically P2P,” says Thad Peterson, senior analyst at Boston-based Aite Group LLC, says in an email message. “It might be counter-intuitive to make a payment in a nearly completely visual medium like Snapchat. Also, the demographic into Snapchat is the same demographic that is into Venmo, and it’s not a big deal to pull up the Venmo app to make a payment when the user is on their device.”

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