Square Financial to offer consumer loans via Cash A

SAN FRANCISCO & SALT LAKE CITY - Block, Inc. (NYSE: XYZ), the parent company of Square Financial Services, Inc. (SFS), has announced that SFS has been cleared by the Federal Deposit Insurance Corporation (FDIC) to provide Cash App Borrow, a consumer loan product, to customers across the United States. SFS, an independently governed subsidiary of Block, Inc. based in Salt Lake City, Utah, aims to promote economic empowerment with this new offering.

Cash App Borrow is tailored to deliver short-term loans that are more manageable and affordable than traditional payday loans or overdraft fees. With an average loan size below $100 and a typical duration of about one month, the product is designed to be smaller and shorter-term than standard bank loans. In 2024, Cash App Borrow witnessed nearly $9 billion in originations through an external bank partner, with the majority of revenue generated from timely repayments. The program maintains a historic loss rate under 3%. According to InvestingPro data, Block’s strong financial health is evidenced by its current ratio of 2.33, indicating ample liquidity to support its lending operations.

Eligibility for Cash App Borrow is determined by several factors, including the customer’s state of residence, Cash App usage and activity, and a history of on-time repayments. The transition to SFS servicing Cash App Borrow loans will not affect existing loan terms or payment schedules. Customers will continue to make payments within Cash App, and SFS plans to start servicing and originating loans in the upcoming weeks, with a cautious strategy to increase volumes over subsequent quarters.

In addition to consumer loans, SFS continues to offer business loans through Square Loans and interest-bearing business savings accounts via Square Savings. The average Square Loan is approximately $10,000, which is significantly less than the average business loan. These loans are designed to provide transparent financing options for Square sellers, repaid through a fixed percentage of daily sales. Square Savings facilitates automated saving for sellers, with savings balances exceeding $300 million as of December 31, 2024. Block’s financial strength is reflected in its revenue growth of 10.06% over the last twelve months, with total revenue reaching $24.1 billion. InvestingPro analysis suggests the stock is currently trading below its Fair Value, presenting a potential opportunity for investors. For comprehensive insights and additional ProTips about Block’s valuation and growth prospects, visit InvestingPro.

Amrita Ahuja, Block’s COO & CFO and Executive Chairwoman of the Board of Directors for SFS, expressed gratitude to the FDIC for the approval, highlighting the bank’s role in providing accessible cash flow solutions to both businesses and consumers underserved by traditional banking and credit systems.

Block, Inc. is known for its suite of financial and technology services aimed at broadening economic access, with brands such as Square, Cash App, Afterpay, TIDAL, Bitkey, and Proto under its umbrella. The company has demonstrated consistent profitability, generating $2.9 billion in net income over the last twelve months, while maintaining a healthy gross profit margin of 37.14%.

This report is based on a press release statement from Block, Inc.

In other recent news, Block Inc. reported fourth-quarter earnings that fell short of expectations, with revenues and adjusted earnings per share (EPS) not meeting market forecasts. Despite this, Block’s adjusted EBITDA exceeded consensus estimates. Analysts have responded to these results with varying adjustments to their outlooks. Piper Sandler reduced the company’s price target to $85 while maintaining an Overweight rating, and Canaccord Genuity adjusted its target to $100, also keeping a Buy rating. Meanwhile, Citi analysts cut their price target to $90 but reiterated a Buy rating, citing ongoing investments in product development and sales/marketing as potential drivers for future revenue growth. Morgan Stanley upgraded Block’s stock rating from Underweight to Equalweight, setting a new price target of $65, reflecting a more balanced risk/reward scenario.

Additionally, Block Inc. announced its adoption of NVIDIA’s latest AI supercomputing technology, the DGX SuperPOD, to enhance its open source generative AI research. This strategic move marks Block as the first in North America to deploy this advanced infrastructure, aiming to democratize AI technology and tackle real-world challenges. Block’s management remains optimistic about the potential growth of its Cash App product, with plans to expand features like Borrow and Buy Now, Pay Later, despite the mixed results in the last quarter.

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