Savings Feature Helps Grow Block’s Cash App Customer Base to 51M

A year after closing its acquisition of Afterpay, Block (formerly Square) is seeing traction in its buy now, pay later (BNPL) business.

And the Cash App mobile wallet, management said on the conference call with analysts, is helping cement Square’s ecosystem across payments and banking.

BNPL contributed $132 million in revenues in the quarter, according to company materials, where the company reported $4.7 billion in sales. Excluding bitcoin revenue, revenue in the fourth quarter was $2.8 billion, up 33% year over year (YoY). In the fourth quarter of 2022, Square gross payments volume (GPV) was $48.6 billion, up 16% YoY on a constant currency basis.

Investors bid the stock up 6% in after-hours trading.

Cash App Transacting Users Grow 16%

Amrita Ahuja, CFO, said on the conference call that Cash App’s installed base grew to 51 million monthly transacting actives in December, up 16% YoY, and added that Cash App’s momentum should continue in the wake of building out its Banking offerings, boosted by its Savings feature. Two out of three of those active users, management said, are transacting on a weekly basis.

At a macro level, and looking at volumes, management said there had been moderation in the GPV growth rates for discretionary verticals in the U.S. beginning in November, primarily for food and drink and retail.

“We have seen these trends continue into the first quarter,” the CFO said.

With a nod to BNPL, the company expects GMV growth of 19% year over year, an improvement compared to 14% growth in the fourth quarter. Losses on that business are management, and Ahuja noted that the loss rate on consumer receivables were below 1% in the quarter — and similar rates are expected in the current period.

The company’s shareholder letter detailed that in terms of it GPV mix, midmarket sellers represented a growing percentage, at 39%, compared to 30% in 2020. The letter also detailed that “Cash App Card is a key driver of increased inflows as Cash App Card actives brought 2x the amount of inflows into Cash App compared to peer-to-peer actives in the fourth quarter.”

During the question-and-answer session with analysts, one observer noted that they use Cash App as their primary bank account, and stated that they used the Cash card each day — and asked whether recurring payments functionality might be offered. Chairman Jack Dorsey remarked of the primary account status that “It’s exactly the relationship we want to have with all of our customers — and we’re seeing more of that.” And though recurring payments might be on the horizon, he said that “right now, we’re really focused on making sure the basics are rock solid for every type of customer that we have.” Savings accounts represent one of the company’s fastest growing products, management said on the call.

And as Dorsey remarked later on the call, “The most important for thing for us, to grow the Cash App ecosystem, is to continue to find adjacent financial services that compliment one another. … Everything that we’re doing around inflows, direct deposit, all these utilities and functionalities that we’re building gets people into the ecosystem.”