Bitcoin-Fueled Square Cash App Outpaces Rival

Square’s mobile payments app, which famously began supporting bitcoin at year-end 2017, is experiencing accelerated growth compared with a key rival. Square Cash has leapfrogged PayPal’s Venmo digital wallet for the number of downloads over the past couple of years, according to analysis from Nomura Instinet cited in CNBC. In fact, given its support for bitcoin trading via a mobile phone, Square Cash may be more aptly compared with cryptocurrency exchange like Robinhood or Coinbase than traditional payments app Venmo.

Square vs. Venmo

Both Square and Venmo apps are used for payments, and consumers are downloading Square Cash at a more feverish pace versus Venmo, as evidenced by monthly growth measured on a year-over-year basis of 128%, on average, for the bitcoin-supported app compared to 75% over the same period for PayPal’s app.

Square Cash has been downloaded a total of 28 million times, which trails PayPal’s Venmo by 1 million. But Square is closing in on its rival. Nomura’s Dan Dolev explained: “Historically, Venmo saw more downloads versus Square, but the gap appears to have peaked in July 2017.”

Square generated more than $34 million in BTC sales in Q1, but it only saw $200,000 of that because of the $33.9 million it originally shelled out to fund the bitcoin account.

Dorsey vs. Schulman

Jack Dorsey and Dan Schulman, the CEOs of Square and PayPal, respectively, take a different tack when it comes to bitcoin. Dorsey has embraced the leading digital currency, as evidenced not only by Square Cash’s support for bitcoin but also for his participation in the cryptocurrency market.

Dorsey is among a group of backers of Lighting Labs, which developed a network to speed up bitcoin transactions and make them less pricey so they’re more conducive to payments. Dorsey was part of a $2.5 million seed financing round.  Meanwhile, amid the competitive market for currencies of late, the Square chief expects a single currency to dominate in the next decade, and he believes it will be, you guessed it, bitcoin.

PayPal’s Schulman, on the other hand, while not entirely dismissive of bitcoin, is less enthusiastic and seems to be missing an opportunity by not positioning the No. 1 digital currency out front the way that Square has.

For instance, Schulman said on the company’s Q1 earnings conference call:

“[We’ve] experimented with Coinbase and others in terms of direct connection to cryptocurrencies. Right now, we do not support directly cryptocurrencies. We don’t see the demand for it from our merchants or our consumers, but that should not be any indication that we don’t see, nor are we excited about the potential of blockchain in the long run.”

Perhaps after Nomura’s findings, PayPal will reconsider their position. PayPal shares are up about 5% year-to-date compared to Square, which has jumped more than 52%.

Fed’s Growing Criticism

Meanwhile, despite the advancements for payments and bitcoin as a payment method, Federal Reserve officials remain as cautious as ever. Fed Governor Lael Brainard speaking at a conference in San Francisco this week reportedly cited “significant challenges” for cryptocurrencies in the “retail financial system.” In Brainard’s findings, digital currencies aren’t ready for the mainstream, but based on the shift toward Square Cash fueled by bitcoin, she may be missing the forest for the trees.

Feature image courtesy of Shutterstock.

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.