Block Earnings Show Jack Dorsey’s Bitcoin and Banking Ambitions

Block, formerly known as Square and the owner of Cash App, has distinct ambitions.

And they vary for each of its business lines. Outside of Square and Cash App, Block also counts the buy now, pay later service Afterpay; decentralized finance and Web3 platform TBD; Tidal, a music streaming service; and Bitkey, a self-custody bitcoin wallet service, among its subsidiaries.

But on Thursday’s (Nov. 7) third quarter 2024 earnings call, Block shared that it was reassessing its subsidiaries and winding down TBD’s operations as well as scaling back investments in Tidal, while transitioning more resources to both Bitkey and the company’s bitcoin mining projects.

“We’re focused on making bitcoin more accessible and secure for people,” Jack Dorsey, Block head, Square head, chairman and co-founder of Block told investors Thursday. “We want to make it usable every day, by having an open protocol for payments on the internet.”

“Bitcoin has all the elements necessary to trust it as a currency,” he added, noting that “Bitcoin mining is going to be very large for us.”

But perhaps Block’s biggest ambition is to bank the totality of its user base, in order to both capture and create enhanced ecosystem benefits. As highlighted in Dorsey’s shareholder letter, the company sees its lending products, spanning Square Loans, Afterpay Buy Now Pay Later, and Cash App Borrow, as the best route to do so.

Still, the company reported weaker-than-expected revenue for the third quarter, and Block shares plunged over 10% on the miss.

Read more: The State of Digital Lending Readiness

Lending Products

Per the company’s materials, Block sees its approach to lending — including its methodology and risk approach — as a competitive advantage in its banking ambitions, noting that in 2023, the business saw a 15% improvement in retention of sellers who adopted a full suite of banking products (three or more) compared with sellers that did not.

“I think this is one of those things that will ultimately set Square and Cash App apart … getting a personally sized loan right to their email inbox, and then pay it off just by selling products.

“We want to lead with technology,” Dorsey said. “And we want to make it very transparent, no hidden fees and everything is visible and simple — particularly the payback experience. With a simple payback experience it doesn’t feel like a loan.”

In his shareholder letter, he noted that “we began offering capital to sellers because we saw a meaningful gap in the market: small businesses were often denied access to credit, in the same way they were once denied access to accepting credit cards.”

That’s backed up by the most recent PYMNTS Intelligence, which finds that while most financial institutions (FI) rate their lending processes as very good or excellent, 3 in 4 are unable to fulfill the loan process — from application through approval to disburse funds — for both consumers and small to mid-sized businesses (SMBs) in the same day. Just 7% of FIs have an average application-to-fulfillment time frame of a few minutes for consumer loans, and even fewer can do so for SMB loans.

Read more: Here’s What Excites Payments Experts About Embedded Finance’s Future

PYMNTS covered on Thursday how, without more streamlined processes for small business loans, mid-sized banks can find themselves bogged down by manual workflows and slower turnaround times, areas that can lead to operational bottlenecks and preclude the benefits of efficiency.

“We’re working to build a primary banking relationship with customers and building a healthy and safe platform is crucial to that,” said Block CFO Amrita Ahuja.

Block noted in its materials that sellers who have taken out a loan use 3.7 Square products on average compared to 1.5 products used by sellers who haven’t taken out a loan.

The company leverages real-time transaction data, AI and machine learning to predict risk, determine eligibility, and set customer limits. “By analyzing data from our customers in real time and comparing them to similar customers with established histories, we can make smarter and faster lending decisions,” executives told investors, noting that traditional FIs often rely on lagging data from credit reports.

For the third quarter Block reported $2.25 billion in gross profit, up 19% from a year ago. Block’s Cash App businesses reported $1.31 billion in gross profit, up 21% year over year. During the same period Cash App Card monthly active users increased 11% to more than 24 million.