Snapcash shutdown: What it means to lose P2P payments
The news that Snap Inc. is shutting down Snapcash, a version of Square Cash offered on its Snapchat social media platform, may have less to do with P2P payments and more to do with the long-term future of the company itself.
Lately, the addition of P2P payments has become a sign of platform maturity. Apple and Facebook didn't build payments into their messaging apps from the start, but they added them late in the game when it was clear they had enough of a network effect to sustain a payments network.
So if adding P2P is a sign of a network's growth, does losing P2P suggest the opposite?
The Snapcash feature launched in 2014 through a partnership with Square, and was meant to drive user engagement with the Snapchat app. While the feature has been free for consumers to use, it’s an expense line that Snap has needed to justify. Unfortunately, Snapcash attracted an audience Snap didn't want: The P2P service was immediately adopted by adult performers, in violation of Snap's terms of service, which prohibit the sale of pornography.
Given Snapchat's March 2018 layoffs of 220 employees, or 7% of its staff, and its exit of office leases that would generate upwards of $45 million in losses (according to its 8K SEC filing), it’s likely that all initiatives not generating any measurable returns are under evaluation. Given that Snap’s annual stockholder meeting is coming up on August 2, its leaders must demonstrate that they are taking the matter seriously.
Not all of Snapchat's challenges are within its control. The company famously suffered a loss of celebrity cachet in February when Kylie Jenner asked — on the rival social network Twitter — “sooo does anyone else not open Snapchat anymore? Or is it just me... ugh this is so sad.” In a single tweet, the company lost $1.5 billion in market value.
sooo does anyone else not open Snapchat anymore? Or is it just me... ugh this is so sad.
— Kylie Jenner (@KylieJenner) February 21, 2018
Easy come, easy go
Snapchat's messaging model was built around the idea that images and messages sent via its platform won't haunt the user forever. These messages are deleted automatically, making the platform a poor choice for making plans that might require chipping in on a dinner or vacation budget.
“Use case drives acceptance and with Snapchat, the rapid, transitory nature of the app doesn’t lend itself to payments, and I don’t think that Snapchat users would find a payment function within the app very useful,” said Thad Peterson, a senior analyst with Aite Group.
The company’s biggest challenge is its singular focus that has no proprietary or patented technology. Even Snapcash wasn't unique to the platform; as a reskinned version of Square Cash, it was limited to the features Square was willing to support.
But the shutdown of Snapcash isn’t necessarily a reflection that Square’s solution is not working. Square Cash has 7 million monthly users and growing, Square said in an emailed statement. Square has treated the app as a sandbox for innovation, adding a payment card, $Cashtag identifiers and bitcoin purchasing to what was once an email-based P2P system.
Snap may fare better once it is no longer beholden to a third party's P2P platform.
Recent news that Snap added capabilities to get into e-commerce such as “Shop Now” buttons to its AR lenses to further support its nascent advertising business is a positive sign to its investors albeit somewhat late in the game. Arch rivals Facebook and Instagram added buy buttons to their advertisements years ago (2015 and 2016, respectively). Since then Instagram has steadily improved its ability to conduct e-commerce on its platform while copying many of Snap’s best features.