Smart. Very Smart.

I applaud Square’s introduction of “$Cashtags” for a number of reasons.

First, some of you may know that I am a bit of a nut when it comes to brand names in payments – I think it is incredibly important that the sending and receiving party both know/understand the word being used for the payment. This can be a generic (“small b”) brand – “Do you take checks?” or a “big B” brand – “I’ll pay you with AmEx”. But both parties need to understand the term! This is a surprisingly important barrier to entry for payments startups.

So Square is expanding their Cash service to support merchant payments. By defining a term $Cashtag, they are giving the world a word that both parties will get – brilliantly piggybacking on the worldwide understanding of the term “hashtag”. And the idea of letting the receiver of payment claim their own “pay me” code, and publicize this – should have immediate and visceral appeal. Why isn’t my bank doing this? Where is my “Bankpay” tag?

Secondly, you really have to admire Square for being willing to cannibalize itself. A small merchant claiming a $Cashtag may prefer this to accepting a card with their Square dongle. You can argue about the relative economics for Square of the two transactions, but the more important point, in my opinion, is that Square isn’t falling victim to its own success, but rather embracing new methods of letting merchant get paid.

Smart. Very smart.

This post was written by Glenbrook’s Carol Coye Benson.