Jack Dorsey’s Block Pushes Into Banking as Stock Price Tumbles

Cai Haun has been a loyal Cash App user for nearly a decade. First using Block Inc.’s app as a place to squirrel away tips from her previous job as a barista, and now to send and receive money from friends for drinks and group dinners. 

Despite her loyalty, the 35-year-old content creator has remained immune to the company’s efforts to turn customers like her into users of its banking services. 

“I feel hesitant to use it for banking,” Los Angeles-based Haun said. “I think this is a leftover from my parents’ era, but I want to go to a bank. I want to be able to walk into a bank and talk to someone.”

Haun’s reticence highlights the challenge ahead for Cash App as it shifts its focus to converting its 57 million active users into consumers of its revenue generating banking services. The move comes as the app once regarded as fintech’s gold standard for viral adoption faces stalling growth and questions over how many of those users will be converted into profitable clients. 

Block shares are down 32% year-to-date, and 80% since their peak of $289 in 2021. By comparison, the ARK Fintech Innovation ETF is down 6.5% year-to-date. The slump has helped drag CEO Jack Dorsey’s fortune down from $16 billion in 2021 to $4.4 billion now, according to Bloomberg Billionaires Index data. 

“The biggest question investors are asking is whether they’re going to get it right on converting some of those 57 million people to become active bank customers,” said Wolfe Research senior analyst Darrin Peller. “Will they go from just using Cash App to pay their friends back for a bar tab to somebody that actually uses it for everyday banking?”

Cash App is part of an increasingly crowded market. Many of its fintech rivals are also vying to become the go-to banking destination for their customers after rising to prominence by offering fee-free accounts and payment services that appealed to younger and sometimes lower income consumers. Chime Financial Inc. recently introduced a 3.75% interest rate for users who directly deposit their paychecks into its accounts, and retail brokerage Robinhood Markets Inc. announced plans to launch checking and savings accounts later this year. 

The sector is poised to become even more competitive, as new entrants including Elon Musk’s X plan moves in the space and the regulatory environment loosens under President Donald Trump.

Underscoring its ambitions, earlier this year Block kicked off a marketing campaign across 15 major US cities to increase awareness of its banking products. These include a high-yield savings account, a debit card, a short-term lending product called Borrow and buy now, pay later services under the Afterpay brand. The company has historically focused on serving the underbanked segment, or consumers who typically have bank accounts but also have to rely on alternative financial services.

Cash App partners with Sutton Bank to issue its debit card and in March received approval from the US Federal Deposit Insurance Corp. to issue short-term consumer loans through Block subsidiary Square Financial Services, which holds an industrial loan charter. 

Cash App is setting its sights on being the primary banking partner for US households earning up to $150,000, Owen Jennings, executive officer and business lead at Block, said in an interview. 

“Our long-term goal is to be the primary provider of banking services to the vast majority of Americans,” Jennings said. “In order to do that you need to cross the chasm in terms of reputation and brand recognition from a simple peer-to-peer app to a full-fledged suite of banking services.”

The goal is ambitious, but Cash App has been making some progress. The number of Cash App users who directly deposit their paychecks into their accounts reached 2.5 million in December, up 25% year over year. The metric is closely observed by analysts, as users with direct deposit set up are more likely to spend with their debit cards and sign-on for additional products through the app. 

“Direct deposit for a long time in fintech has really been the holy grail,” said Mark Palmer, senior equity research analyst at The Benchmark Company. “The key is to make the choice to directly deposit one’s paycheck onto Cash App as compelling as possible and that really comes down to various offerings on the app. We’ve seen Block get increasingly aggressive in terms of enhancing that offering.” 

Similarly, growing direct deposits is a key objective for PayPal Holding Inc.’s Venmo, which has also been striving for years to turn its more than 90 million active users into profitable clients — a renewed focus for its new Chief Executive Alex Chriss. 

“If you’ve got to 57 million people you should declare victory and start figuring out how to make money,” said Bryan Derman, managing partner at payments consulting firm Glenbrook Partners. “It’s a version of the same challenge PayPal has with Venmo.”

Cash App’s revenue comes from trading fees on Bitcoin, interchange from debit-card spending, fees on stock purchases, interest on loans and fees for instant transfers to an external bank account. The company also takes a slice of interest from user balances deposited at its banking partner Wells Fargo & Co. In 2024, Cash App’s users brought $283 billion worth of inflows into the app. 

The company currently has 5 million monthly actives for its short-term lending offering Cash App Borrow, Chief Financial Officer Amrita Ahuja said during the company’s fourth quarter earnings call. It plans to grow the number by offering higher limits, improving underwriting, integrating the service with direct deposit and expanding to more states, Ahuja added. It is also working on launching and growing Afterpay services on its card, she said.

“That’s where they’re going to make money,” said Shruti Shah, a partner at pre-seed investment firm Symphonic Capital. “You make money on credit, on credit card interchange and then on interest rates. That is how financial institutions are able to grow their revenue.”

Part of the challenge of winning – and keeping – banking clients is to convince users that Cash App is a safe choice as a primary banking partner. Earlier this year, the Consumer Financial Protection Bureau ordered Cash App to refund consumers up to $120 million and pay $55 million to the agency’s victims relief fund after finding that parent company Block’s investigations into fraudulent, unauthorized transactions on Cash App accounts were “woefully incomplete.” 

In a statement released after the settlement, Block explained that unprecedented growth during the pandemic had tested the company’s customer service. Since then, Block has made significant investments in customer support and resolving concerns, the company said in the statement.

In January, Block also entered a settlement agreement with nearly all of the state regulators where it holds money transmitter licenses related to aspects of its anti-money laundering program. The business is engaged in ongoing negotiations with the New York Department of Financial Services. 

“I’m not worried about the compliance issue, especially under the current administration,” Mizuho Securities senior analyst Dan Dolev said. “The challenge is to be able to profitably bank a lot of people that are not normally banked elsewhere.”

This article was generated from an automated news agency feed without modifications to text.