Block Doubles Down on Banking Base as FinTech Competition Grows

Jack Dorsey is no stranger to playing the long game.

But Block, the financial services and digital payments company formerly known as Square, missed Wall Street’s short-term estimates for its fourth quarter 2024 earnings and revenue numbers Thursday (Feb. 20), sending the stock down high single-digits in extended trading.

Executives highlighted on Thursday’s investor call that Block, which was an early leader in providing point-of-sale systems for small and medium-sized businesses (SMBs), faces increased competition from FinTechs and a more dynamic landscape.

Block’s leadership emphasized the strong engagement with Cash App, which saw gross profit per active user increase by 13% year over year to $76 in Q4 2024.

“We expect to exit 2025 at a Rule of 40 run rate, ahead of schedule, and we continue to expect to deliver Rule of 40 in 2026 as this work compounds,” CEO Dorsey said.

“We’re excited to share more about our progress with the investment community and look forward to holding an investor day later this year,” he added.

During the call, Block outlined three primary product goals for 2025: increasing global economic access, enhancing openness and customer trust, and leveraging automation to boost creativity and efficiency. Central to its strategy is the creation of a “neighborhood network” connecting sellers, buyers and communities through its products.

Strategic Developments

For the year ahead, and as it did for much of the past fiscal year, Block plans on doubling down traditional banking territory, pushing boundaries with its lending services and tools aimed at small businesses.

For example, during 2024 the company transitioned Square from a payments solution to a comprehensive commerce platform, enhancing seller flexibility and streamlining onboarding through the new Square Point of Sale app. The app consolidates functionalities of five previous apps, with 50% of new sellers already adopting it.

Executives also pointed to Cash App’s continued evolution, citing an expanded suite of banking features including high-yield savings, paycheck allocation to investments, and free tax filing. The Cash App Borrow service scaled up to nearly $9 billion in originations, demonstrating strong demand for micro-lending services.

The company also emphasized efficiency gains through a functional organizational model, enabling faster product development and stronger integration between Square and Cash App ecosystems.

For 2025, Block anticipates at least 15% growth in gross profit. The company projects $2.1 billion in adjusted operating income, representing a 21% margin on gross profit. The Rule of 40, combining profit growth and operating margin, is a key performance benchmark for the company.

Read more: Block Earnings Show Jack Dorsey’s Bitcoin and Banking Ambitions

The company’s fourth quarter financials also showcased Square’s strong performance in the quick-service restaurant sector, contributing to a 10% year-over-year increase in gross payment volume (GPV) to $58.9 billion in Q4 2024. Additionally, Cash App’s “Bank Our Base” strategy has gained traction, with paycheck deposit actives growing 25% year over year to 2.5 million.

As has been spotlighted by PYMNTS Intelligence and Visa, the advantages of tapping into external solutions are readily apparent. PYMNTS explored on Tuesday (Feb. 18) how with certain regulations on hold, FinTechs may increasingly look to become neobanks.

As Block broadens its financial services, it faces increased regulatory scrutiny. In January, the company agreed to pay $80 million to 48 U.S. states over deficiencies in anti-money laundering controls (AML) within Cash App. Additionally, a settlement with the Consumer Financial Protection Bureau (CFPB) required Block to pay $175 million related to inadequate consumer protections.

In an interview with PYMNTS Karen Webster at the start of the month, Thredd CEO Jim McCarthy explained that a seismic shift will define the FinTech sector’s 2025.

“We’re finally seeing what I would consider to be the real washout,” McCarthy said. “…It’s going to be a case of winners and losers.”

A key reality that will separate the winners from the losers is that “people are willing to pay for value,” he said. “Payments are at the heart of commerce, and people need the ability to obtain liquidity, no matter if it’s a small business or a consumer.”