Square Inc. is bridging the gap between its consumer and merchant facing businesses by launching On-Demand Pay. Employees of Square merchants can now obtain parts of their pay checks instantly when needed via Cash App. This development comes in response to workers’ increasing need for instant access to pay while responding to the demands of the pandemic. It also adds weight to the company’s recently booming banking business.
With On-Demand Pay, hourly workers have the option of transferring up to $200 of their earned wages to their accounts via Cash App, Square’s mobile payment service that allows customers to spend, send, store, and invest money. This option is free for users and is available when workers clock out at the end of their shifts. Some employees will also have the option of transferring their pay to a linked debit card for a 1% fee per transfer, not to exceed $2. Employers face no changes when processing payroll when employees use this feature, as Square Payroll automatically adjusts employee’s earnings during the next scheduled payroll.
Speaking on the release, General Manager of Square Payroll, Caroline Hollis shared that the decline in cash tips throughout the food-service industry in particular prompted the company to look at ways to make funds more accessible to the 800 million strained hourly workers across the country. “Cash tips have been a historically important form of income and something people receive every day, but with COVID, a lot of those cash tips dried up,” she said.
Square also released Instant Payments for small businesses. Commenting on this, Hollis shares "businesses still run payroll on a fixed schedule, employees are paid days or weeks after they’ve worked. For employers, it can take up to four days for payroll funds to move from their bank account to their team. With Instant Payments, employers can now fund their payroll instantly, getting money to their team faster.” With Instant Payments, Square payroll customers are now able to fund their staff pay with the money in their Square Balance, offering relief for companies struggling to budget their expenses.
While Square’s seller base has received a blow this year as small businesses have been forced to shut down, the company has ramped up efforts to grow its banking business through Cash App. The peer-to-peer app pits itself against Venmo, offering direct deposits, debit card, equity, and cryptocurrency trading. For this alone, shares of Square are increasing with a 130% stock rally reported this year, with the app’s gross profit rising 167% year-over-year to $281 million. No doubt with the release of Instant Payments and On-Demand Pay, this San Francisco-based payments company will only continue to grow.