An article in The Wall Street Journal give high praise to Block and its ability to generate revenue and income from its Cash App product. The article notes that revenue from Cash App is closing in on the level of revenue generated from Square’s merchant processing business.
Once a simple P2P app, Cash App has expanded into a payments “super app” that includes a debit card, a Buy Now, Pay Later option, investing in equities, and crypto services (of course). Here is more from the article that suggest that Block will do well, despite the recent turmoil experienced by tech and fintech stocks:
With the market turning against money-losing companies, the onus is on once highflying growth stocks to show a clear path to big profits. Block, the operator of both Square and Cash App, has the pieces to make a compelling case. Even if user or e-commerce growth slows, Block’s consumer Cash App is rapidly adding ways to monetize its existing users via additional financial services, as well as to help boost its Square seller business. Rather than adding still more users, this kind of per-user revenue expansion is what investors are looking for now across many fintech companies, ranging from PayPal to Robinhood Markets.
With Cash App, the average monthly active user brought in just over $1,000 to their accounts in the first quarter of 2022. And Cash App monetized those inflows into gross profit—defined as revenue minus certain transaction processing, bitcoin and hardware costs—at a rate of just under 1.2%. For an active customer in March doing direct deposit with Cash App, that increased their inflows on average by 6½ times compared with someone just using Cash App’s peer-to-peer payments service. On top of that, an active account in March that was an active user of the company’s debit-card, stock-trading or borrowing services increased their monetization rate on average to 1.7 times that of a peer-to-peer-only user.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group