How Block’s Afterpay Deal Could Energize Its Seller And Cash App Businesses At the Same Time

With the close of Block Inc.’s $29-billion acquisition of buy now, pay later platform Afterpay Ltd. at the end of January, the payments company installed a key component in a plan to more tightly integrate its seller and consumer businesses, Square and Cash App, according to Block’s top executives.

Indeed, the San Francisco-based company now has a “tremendous opportunity” to connect the two businesses by offering installment-payment services to both merchants using Square and their customers using Cash App and the app’s new wallet Cash App Pay, chief financial officer Amrita Ahuja told equity analysts in a conference all Thursday afternoon. With the new nomenclature introduced in November, Block is the name of the overarching company, while Square refers to the company’s merchant-processing business. Cash App houses Block’s payments, savings, and cryptocurrency services for consumers.

This flywheel effect between Block’s two critical businesses comes as the company has seen Cash App generate a 22% annual growth rate to 44 million monthly active users, according to Ahuja. She and chief executive Jack Dorsey spoke on the call, held to discuss Block’s fourth-quarter 2021 results. Now, with the ability to offer installment payments via Afterpay, “we have a strong potential to deepen engagement with younger consumers,” Ahuja said. “There’s tremendous opportunity” to connect Square and Cash App via BNPL, she added.

This is because the Afterpay acquisition will allow Block, on the one hand, to offer BNPL services to sellers that use Square Online for e-commerce transactions in the United States and Australia, On the other, the company can offer Cash App users the ability to find Afterpay merchants and manage their installment loans directly in the app. Afterpay serves 19 million consumers , 65% of them outside the United States, according to numbers Ahuja mentioned Wednesday.

“This is a huge integration of our ecosystem, Square and Afterpay,” Dorsey said. “For Cash App, there’s a long roadmap ahead. We’re really excited about what ]Afterpay] brings to our Cash App customers.”

BNPL isn’t the only new feature for Cash App. Block is also adding Cash App Taxes, a digital facility for consumers to file tax returns and receive any refunds early, Dorsey said. “We still see a lot of complications in filing taxes” that Cash App can solve, he added.

On the seller side, Block continued its long march toward larger merchants. Of the $42.6 billion in payment volume processed in the fourth quarter, $15.7 billion, or 37%, came from sellers with $500,000 or more in annual volume. That’s up from 30% a year earlier and 28% in the last quarter of 2019. Overall volume grew fully 45% from the last quarter of 2020 to that of 2021.

For the quarter, Block recorded $17.7 billion in revenue, nearly double the revenue taken in in the last quarter of 2020. Cash App’s Bitcoin trading activity exploded in that year, generating $10 billion in revenue in the December quarter, up from $4.6 billion in 2020’s fourth quarter.