(Photo courtesy marketwatch.com)
It’s no longer all about the Benjamins. The Covid-19 pandemic has accelerated the demise of cash due to public health concerns – which is great news for Square’s Cash App and PayPal’s Venmo.
Change is in the air…but not in our wallets. As our world becomes increasingly contactless, people have begun to shun physical bills and coins, opting to shop online and send payments digitally instead. As a result, PayPal shares have surged 65% while Square has more than doubled so far in 2020.
- Both stocks are at all-time highs
Like Instagram or Twitter, peer-to-peer payments services become more valuable to users as more members of their social circles join. But while you might not be thrilled about your mom following your Twitter account, you definitely want her to add you on Venmo. Unlike social media platforms, younger users actually have an incentive to introduce their older relatives to the payment services, which helps the apps grow their user base.
The network effects of peer-to-peer payments give PayPal and Square a leg-up on traditional banks. Because users are helping PayPal and Square do their marketing, they have lower customer acquisition costs.
The future is bright for Cash App and Venmo. Even before the coronavirus pandemic, the use of paper currencies was already declining. And given the favorable trends, it’s likely that Square and PayPal will continue to thrive.