PayPal launches PayPal.me to compete with Square’s Cashtags

Today PayPal unveiled a new product called PayPal.me that will let users get paid through a customized URL.

It works like this: You set up a link through PayPal (mine is PayPal.me/ruth) and then when your friends are looking for a way to send you cash all they have to do is go to your PayPal.me page, log into PayPal, and pay you.

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The product concept is tied to a study that says people miss out on a lot of cash when their friends forget to pay them back.

“About 50 percent of Americans say they have small debt from friends and family that is owed to them,” says ‎PayPal senior director of global consumer product management, Meron Colbeci. He says PayPal conducted a study revealing that people in the U.S. are owed a massive $51 billion in small peer-to-peer debt. The idea behind PayPal.me is that people will be more likely to pay you back if, when you’re reminding them to pay up, you include a blue link to a place where they can do just that.

This new feature smacks of a Square product launched earlier this year called Cashtags. The feature is essentially a hashtag for getting cash sent directly to you through Square’s Cash.me site.

The main difference between Cash.me and PayPal.me is that the latter requires users to have a PayPal account, regardless of whether they’re sending or receiving money. If a person sending a payment doesn’t have a PayPal account, the site will redirect them to a page where they can quickly be onboarded to PayPal.

Cashtags, on the other hand, enables those without a Square account to pay friends and businesses by inputting their debit card information.

This isn’t the first time PayPal has taken a page out of Square’ playbook. The company was also one of many to launch a copycat of Square’s signature credit card reader for mobile phones and tablets. But this isn’t just a matter of keeping up with the Joneses.

For instance, while PayPal is launching a product that competes with Cashtags functionality, it is not competing on price. Square offers its Cashtags service to businesses for an incentivizing 1.5 percent transaction fee (less than its typical processing fee of 2.5 percent for Square Register transactions).

In contrast, businesses that set up a PayPal.me site will pay the same fee they pay through PayPal (2.9% + $0.30 per transaction in the U.S.).

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The reason PayPal doesn’t need to fuss over keeping prices low is because of the scale of its business. PayPal has 169 million customers in 190 countries. Starting today, users in 18 countries will have access to PayPal.me. Meanwhile, Square Cash, with its Cashtags feature, is only available inside the U.S.

By launching PayPal.me quickly to an international audience, PayPal is actually staying ahead of its competition — especially if Square ever pushes its Cash app to a global audience.

*Update, PayPal’s U.S. fee is 2.9% + $0.30 per transaction, not 4.4% + $0.30 per transaction as stated earlier.