Block Pursues a ‘Compelling Opportunity’ in Linking Cash App With Square

Block Inc. is the parent of the well-known Square point-of-sale equipment and processing business, but it’s the company’s Cash App unit that has been stealing a steadily growing share of the limelight at the 13-year-old company. And now Block is working to find ways to link its two big units so that one reinforces the other.

In that effort, it may have just scratched surface. “Linking our two ecosystems is our most compelling opportunity. We’re just starting a lot of that work right now. It will take some time,” Block chief executive Jack Dorsey told equity analysts Thursday afternoon during a call to discuss the San Francisco-based company’s third-quarter results.

One example: Cash App during the quarter completed the rollout of a “Discover” tab that will let users zero in on Square merchants that accept Cash App Pay, the app’s payment facility. And now, Cash App is also starting to be introduced to merchants that accept Afterpay, the buy now, pay later platform Block acquired early this year for $29 billion.

The strategy, Dorsey added, won’t unfold overnight, warning a second time that it “will take some time.” Still, he said, “it will unlock a lot of opportunity for both the Cash App ecosystem and the Square ecosystem.”

It may not be a surprise that Block is trying to move more of Cash App’s momentum to the point of sale. The unit’s Cash App Card, a Visa debit card, reached almost 18 million active users last month, the company said Thursday. Card users now account for roughly half of the money flows into Cash App, officials said, allowing Block to look at applications that go well beyond the initial peer-to-peer payment function the app started with—aside from Bitcoin and stock trading.

Cash App’s gross profit, indeed, is now nearly equal to Square’s—$774 million for the latest quarter compared to $783 million, according to numbers Block released Thursday. But Cash App’s gross profit grew 51% over the past year, compared to 29% for Square. Leaving out Afterpay, the growth rate for Cash App profit is still 78%.

But Square remains a robust and growing POS business, with total volume of $50 billion in the quarter, up 20% year-over-year. Th unit’s largest merchants—those with $500,000 or more in annual purchase volume—now account for 40% of overall dollar volume, up from 37% a year ago. Square has for years now worked to attract larger sellers on the grounds that they offer greater profit.

For the quarter, Block reported $4.52 billion in total net revenue, up 18% year-over-year. But taking out Bitcoin revenue, which is nearly completely offset by Bitcoin trading costs, and also omitting Afterpay, net revenue came to $2.54 billion, a 25% increase.