Merchant Advance Blog

Blog Article: Did Snapcash Just Try To Break the Payment Internet?

Snapchat: an app for mobile-happy teens, right? An app for maybe sending private pictures to your significant other, or someone who you think ought to be?

As of yesterday: not anymore.

Hit Send, Collect 200 Dollars

The hip, low-impact image-based messaging service made headlines when Facebook courted it with the alluring offer of $4 billion (which its creators declined.) Now, Snapchat has made a surprising addition to its core features: integration of mobile payments, which they have christened Snapcash.

The service, developed in partnership with mobile payments processor Square (who we’ve previously discussed on this very blog) promises to let users (currently in the United States only) make debit payments to one another with the ease and speed of a text message.

What on earth, you may ask, do mobile payments have to do with instant messaging? Consider for a moment Apple Pay (another recent blog subject), which touted a similar revolutionary approach to streamlined electronic payment earlier this year. In one stroke, Snapcash has made Apple’s service look unusually cumbersome: you need to be an iPhone 6 user to even start working with Apple Pay, and merchants are required to upgrade their point of sale terminals with new wireless readers to take advantage of the system. Apple Pay now comes across as the formal, enterprise-centric solution to mobile payment, while Snapcash has positioned itself as the facilitator for informal, person-to-person monetary exchange. Look at its its debut advertisement, which opens with a young man and woman out shopping:

“This would be perfect for mom. It’s thirty bucks.”

“Here, let me send you fifteen.”

The ad gets… considerably weirder from there on out. But the message is clear – it’s about people. The service aims to take advantage of Snapchat’s almost nonexistent barrier to entry (the app is free to download and use) as well as its increasing ubiquity among mobile users (especially in younger demographics.) In theory, an independent sole proprietor or small business could sign up for Snapchat and begin processing debit payments this way with an initial cost of setup that makes even the ultra-lean Square look expensive.

Snapping the Privacy Barrier

Snapchat has made news for one other exceptionally important reason: privacy struggles. The service was hacked on Dec. 31, 2013, leading to the compromised release of at least some sensitive information from an estimated 4.6 million accounts.

One of Snapchat’s defining features was supposed to be its ability to exercise discretion with user content: pictures are deleted within minutes of being sent or received by any given user. However, these photos – personal, deeply private or sensitive as they may be – are all handled through a fairly traditional server architecture. A second hack this past October is said to have dredged up data from these servers, a theft of content amounting to over one hundred thousand images previously thought to have been sent and “deleted.”

Throwing debit card access information into the mix, as Snapcash plans to do, presents additional digital security questions serious enough to make even the most seasoned coder break out in a cold sweat. Partnership with Square, already an established leader with a sparkling track record in the mobile payments field, is a good start. The team-up allows Snapchat to work the social and digital magic required to market and popularize the service, while Square takes care of the more delicate transactional and security details. It remains to be seen whether Snapchat’s struggles with privacy will put caution in the minds of its user-base when it comes to the new service. Users have already posted some fairly incredulous comments on the official announcement page.

It seems like more and more consumers will be reaching for their phones instead of their wallets when they walk into local businesses. Snapchat will need to prove itself in this emergent market – the idea is strong, but success in execution will depend greatly on how existing Snappers respond – and possibly on whether or not businesses can find a realistic application of the technology to influence their payment workflow.

What do you think? Could you see your small business or sole proprietorship accepting payments with Snapcash or services like it? Would you play to the mobile demographic? Or does the risk outweigh the benefits?

Let us know on Facebook or Twitter using the buttons below! 

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