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Sole proprietors on the Cash App platform may have a way to accept payments from consumers who also have Cash App accounts.
Cash App, a part of Block Inc., says a test of Cash App-funded payments to a sole proprietor with a Cash App account is under way now. It gives sole proprietors a way to earn and track their income with their personal Cash App accounts. It does not require a separate business account and has no fees.
Eligible merchants can enroll from their personal accounts. Then they can tag payers as customers and track all of their earnings within a dedicated Earnings tab. Cash App charges no fees for this. Standard send and receive limits apply to transactions with the P2P payment limit available in a user’s profile.
Cash App says unless a seller receives more than $20,000 and completes more than 200 transactions in earnings in a calendar year, it will not issue a Form 1099-K, a tax document that reports the gross amount of payment card and third-party network transactions received in a calendar year.
Many sole proprietors also use Zelle, the peer-to-peer payment service from Early Warning Services LLC, for similar purposes. Zelle is not required to report transactions made on its network because the information reporting regulation does not apply to it, Zelle says on its Web site. Zelle launched its Zelle tag, a personalized identifier for small businesses, a year ago and now counts more than 1 million participants.
Cash App, which plans to expand access to the program later this year, says 70% of Cash App monthly active users earn income via freelancing, content creation, hourly work, gig work, and other avenues. These users manage an average of 2.7 payment channels to get paid, a figure that is nearly double that of a salaried worker, Cash App says.
“Millions of people are earning income in new and more flexible ways, and they deserve tools that keep up with them,” Owen Jennings, Block executive officer and head of business, says in a statement.
It’s of little surprise that these very small merchants would use multiple payment methods, says Cliff Gray, principal at Gray Consulting Ventures LLC.
“Predictably, these small and very-small merchants pay the most for acceptance, and are therefore most likely to employ alternative payment methods,” Gray tells Digital Transactions News via email. “Unlike traditional retail environments, many sole proprietors don’t require real-time payments, bear little to no transaction risk, cannot realistically meet card brand requirements, or combinations of these factors.”
Payment card acceptance costs also are a factor. “Lately, rising acceptance costs and tighter regulations are exacerbating this problem; Visa and Mastercard aren’t helping themselves in this regard, either,” Gray adds.
Gray says there are plenty of competitors for this type of payment, citing Venmo and Apple Cash along with Zelle. “In a growing market of peer-to-peer solutions, it will come down to the path of least resistance—whoever makes it easiest for the sole proprietor to accept bank-to-bank payments.”
