Block’s Expansion into Consumer Lending: A New Chapter for Cash App
Block, the digital payment company formerly known as Square, made an announcement on Thursday, September 22, 2022, that it had secured FDIC approval to issue loans through its Cash App platform. This move marks a significant expansion into consumer lending for the company, which has been experiencing a period of slowed growth and a 33% decrease in stock value this year.
Background on Block and Cash App
Block, founded in 2009 by Jack Dorsey and Jim McKelvey, began as a mobile payment solution for small businesses. The company’s flagship product, a small white square reader that could be plugged into a smartphone or tablet to accept credit card payments, quickly gained popularity among small business owners. In 2013, the company introduced Square Capital, a business loan service, and later expanded its offerings to include point-of-sale systems and payroll services. In 2018, the company rebranded as Block.
Cash App, launched in 2013, is a peer-to-peer payment service that allows users to send and receive money using a mobile app. It also offers a debit card and investment services, allowing users to buy and sell stocks, Bitcoin, and other cryptocurrencies.
The Expansion into Consumer Lending: Cash App Borrow
With the FDIC approval, Block is now able to offer personal loans through Cash App Borrow. The loans will be issued by Block’s banking subsidiary, SBD Bank, and will range from $20 to $20,000 with repayment terms of up to three years. The interest rates for the loans will vary based on the borrower’s creditworthiness.
Impact on Block
The expansion into consumer lending is a strategic move for Block as it seeks to diversify its revenue streams and grow its user base. The company has seen slowed growth in recent quarters, with its most recent earnings report showing a 12% decrease in gross payment volume year-over-year. The addition of Cash App Borrow is expected to help offset this decline and bring in new users to the platform.
Impact on Consumers
The availability of loans through Cash App Borrow provides a convenient option for consumers who may not have easy access to traditional banking services or who prefer a digital lending experience. The loans will be available to users in eligible markets, and the application process can be completed entirely within the Cash App app. However, it’s important to note that all loans come with risks, and borrowers should carefully consider the terms and interest rates before applying.
Impact on the World
The expansion of consumer lending through digital platforms like Cash App is a trend that is expected to continue in the coming years. According to a report by Allied Market Research, the global online lending market is projected to reach $1.8 trillion by 2027. This growth is driven by the increasing popularity of digital payments and the convenience and accessibility of online lending platforms. However, it’s important to note that the lack of face-to-face interaction and regulatory oversight can pose risks for consumers.
Conclusion
Block’s expansion into consumer lending through Cash App Borrow is a strategic move that is expected to help the company diversify its revenue streams and bring in new users to the platform. The convenience and accessibility of digital lending platforms like Cash App are a trend that is expected to continue in the coming years, but it’s important for consumers to carefully consider the risks and terms before applying for a loan.
- Block has obtained FDIC approval to issue loans through its Cash App platform.
- The loans will be issued by Block’s banking subsidiary, SBD Bank.
- The expansion into consumer lending is a strategic move for Block as it seeks to diversify its revenue streams and grow its user base.
- The availability of loans through Cash App Borrow provides a convenient option for consumers who may not have easy access to traditional banking services or who prefer a digital lending experience.
- The global online lending market is projected to reach $1.8 trillion by 2027.
