Startup is looking for a way to Europe: Cash app attacks Paypal and N26

Sunday 10th January 2021

Startup is looking for a way to Europe
Cash app attacks Paypal and N26

By Caspar Tobias Schlenk

The tech company Square now wants to gain a foothold in Europe with its Cash App and is looking for staff to do so. The startup has not only managed to build a cool image, but is currently experiencing a real upswing. How great is the danger for established fintech players?

Large banks are currently feverishly looking for takeover targets; in deals they have taken over fintechs and tech companies – but a streaming service is hardly on their wish list. It is different with Square founder Jack Dorsey, who negotiated the purchase of Tidal a few weeks ago. Dorsey is said to have met the rapper and Tidal owner Jay-Z several times, as reported by Bloomberg.

The potential acquisition illustrates well how Dorsey is building a brand that has little to do with the image of traditional financial brands. At the end of 2020 he started his own clothing line for his Cash App. Sweaters in the style of his company can be bought from $ 60.

Meanwhile, Square has not only managed to create a cool image with the Cash App – the payment company is currently experiencing a real high. On the stock exchange, investors value them at more than $ 100 billion. And there were increasing signs that Square is soon looking for the way to Europe. A few days ago the company advertised the position of an experienced "European Operations Manager" who will be responsible for the expansion of the Cash App in Europe.

Square already has a European banking license

Three years ago, Dorsey, who also runs Twitter, announced an expansion in Europe at an event in London's Soho Piano Bar. It was then that Square started out with its payment terminals, which it sells to restaurants and retailers (the company's second major line of business).

But since then it has not been to mainland Europe. This time the situation is different. Just recently, Square bought the startup Verse, which has a total of 600,000 downloads. With the app from the Spanish fintech, small amounts of money can be sent back and forth between friends, the so-called peer-to-peer payment (P2P). The company does not have a large user base; according to the Airnow appraisal tool, there are around 600,000 downloads. However, Verse already has an e-money license in Lithuania, which can also be used in other European countries. It is to be merged with the Cash App in the future, according to Square.

In the current job advertisement, the tech company is now looking for a manager who is "in a leading position responsible for the Cash App in Europe". The new manager should work out a roadmap with the product team to introduce "specific features and functions for the European market". The ad also mentions a lot of collaboration with partner companies, which could include Verse or Satispay, an Italian fintech in which Square recently acquired a stake. The Irish newspaper Independent first reported on the ad. A company spokeswoman did not want to comment further.

$ 70 in revenue per user for the quarter

It will not be easy to assert oneself with the P2P function, PayPal is a strong competitor. In the USA, this money sending function was the anchor product for the Cash App. For some time now, however, there has been a bank card, users can buy crypto currencies and stocks, and the app also offers a discount program. The banking offering has grown significantly in recent years and has come closer to the PayPal subsidiary Venmo: 30 million users use the app every month. Square has benefited from crypto sales in particular in recent months, with Bitcoin sales amounting to 1.6 billion dollars. In the third quarter of 2020 alone, it generated sales of just under $ 70 per user, after deducting the direct costs, there were still twelve dollars.

It can also score points in Europe with its image. "Cash App works with the rapper Travis Scott and the Tik-Tok star Addison Rae, so the fintech reaches teens and at low marketing costs," says Dennis Müller, founder of the Amie app, who previously worked as a product manager at N26 Has. The brand is entertaining and "does not try to look serious".

The search for an anchor product

But even if this works, the Cash App now needs an anchor product in Europe too. Customers who already use PayPal will be difficult to attract. Alternatively, the Cash App could start trading stocks and crypto directly. "The brand and reach is impressive," says Christian Nagel, partner at the venture capitalist Earlybird and investor at the smartphone bank N26. He wonders, however, how well Square can manage to cope with the different regulations and markets.

He and his team are currently looking for new fintechs who are attacking PayPal with their business model. "Because the company is taking too much margin from dealers," said Nagel. If the merchants have an account with the new player and the customers use their own app, the conventional payment infrastructure can be avoided. "Such a fintech will come, it's only a matter of time," says the financier. Square has at least one chance of achieving this in the future. If it can first establish itself with its brand among young people in Europe, it will also be dangerous for fintech players such as PayPal or the smartphone banks N26 and Revolut.

This text was first published by Finance Forward.