Clubhouse’s free peer-to-peer money transfers aren’t really free. Here is why

Clubhouse has recently announced to partner with Stripe in the United States to offer in-app peer to peer payments. This move lets Clubhouse users reward content creators by sending them a donation of $5 for instance. In doing so, Clubhouse follows the great examples of the likes of Bigo, Kuaishou, Twitch & co. to embed payments into the user journey.

According to the company’s announcement, all you need is a bank account and a debit / credit card. Clubhouse thereby indicates that they DON’T take any share in the process, leaving the full donation to the content creator. Isn’t this a great move? As per the company’s official blog post:

“100% of the payment will go to the creator. The person sending the money will also be charged a small card processing fee, which will go directly to our payment processing partner, Stripe.Clubhouse will take nothing.”

Here’s how it will work: A user can send a payment in Clubhouse by going to the profile of the creator to whom they want to give money. If the creator has the feature enabled, the user will be able to tap “Send Money” and enter an amount. It’s like a virtual tip jar, or a Clubhouse-branded version of Venmo. 

However, looking at the donation, you may notice the card processing fee (split between Stripe and card issuer) is 0.46 cents on a $5 donation. That is 10% potential income for Clubhouse lost to card processors and issuer. This share even increases on a 1-dollar donation.

Even a giant like Uber struggles to find a frictionless payments solution. More than 10% of the cost of your Uber ride goes to cover debit cards transaction fees. In some emerging and low-income economies this fee alone could buy you an intercity train ticket. This is what has led Uber to introduce a dedicated Uber payment card, which can be topped up by any debit card and then used to pay for any service on the Uber platform.

Why are people so price-sensitive when sending money to friends and family via remittance companies? And why do they not seem to “care” how much of their money actually is given to their broadcaster friend? The answer has something to do with the amount being sent. For example, we are less sensitive to a 20% commission when tipping someone $1 vs. a 20% commission when sending someone $1,000. Why does it have to be so difficult still in 2021 to receive $1 from 1,000 people during a live stream? Or why did Jim McKelvey, a part time glass artist, and now the cofounder of CashApp have to lose a sale when he couldn’t accept a customer’s amex card?

It doesn’t have to be. In this present day, the financial world is still not as optimised as we’d like it to be for it to cater successfully to the growing need of a flexible, hassle-free, and straight-forward financial ecosystem. The inability to easily move $1 between any two people led apps to build entire ecosystems based on in-app points and credits. While this avoids regulatory complexities and expensive tech – it restricts growth as well as transformative new business models.

There is a clear trend towards fewer apps that cover most aspects of our daily life and it won’t be long until these apps offer fully embedded financial products too. Verso will play an instrumental role in unlocking this value. Our decentralised protocol will enable various non-financial actors embed financial products on top of their primary product offerings, in a compliant manner.  Frictionless, real-time transfers are what matters. The greatest catalyst to enabling the next generation of capitalism is really the ability to spend and earn right from within our mobile-centric worlds.

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