Cash app gets the money | Mint

Cash app gets the money

Reuters
Reuters

Summary

  • More people are regularly putting their paychecks into Block’s Cash App, which could be a sign of its durability

Everybody wants people’s cash these days. Cash App is doing a pretty good job of getting it.

Block, provider of the Cash App and Square merchant payments, presents investors with a bevy of metrics each quarter. What is emerging as one of the most important is inflows into Cash App, representing money that people are moving into their digital accounts. There are a number of ways to do this, such as linking to a bank account, mobile depositing a check, bringing paper money to a place such as Walmart that partners with Cash App, or directly depositing it from a paycheck. Cash App’s inflow was a record $52 billion in the third quarter, up 19% from a year earlier.

That last method of adding funds—direct deposit—might be the most significant of all. It represents a regular flow comparable to how somebody would use a traditional bank account. Direct deposits, together with deposits of paper money, made up 14% of inflows in the third quarter versus just 9% a year earlier.

A lot of inflows pass right through Cash App, such as by people doing peer-to-peer payments and moving that money back to a bank, or by people spending it. But when Cash App has people mechanically, regularly putting money into their accounts, those customers can potentially be more frequently monetized by doing things such as using a Cash App Card for purchases, paying for things at merchants via Cash App, trading stocks or buying crypto. Block said it now provides basics such as account and routing numbers instantly to users who order a Cash App Card to make it easier to start using Cash App for direct deposits. About half of inflows in the quarter were from Cash App Card users.

Of course plenty of companies are fighting for consumers’ cash these days. It is increasingly valuable, both because you can make money from it since interest rates have risen and because it is becoming scarcer as deposits tick lower. What is notable about Cash App is that, unlike some online banks and brokerages, it doesn’t currently pay people for cash via high interest rates. It evidently is giving people sufficient other reasons to move their money, much like a retail bank does.

Besides the revenue generated, Cash App has the opportunity to provide Block more diversification away from discretionary spending, which many are worried will fall to the wayside as people stretch to cover inflated day-to-day bills. Block said that the average active Cash App Card user made 16 purchases in September, including paying for non-discretionary things such as gas, utilities and groceries. It also gives Block a potential avenue for stealing market share from other payment methods if people are keeping more of their money within, and spending via, Block’s ecosystem. This could be vital to maintaining the ability to grow if there is an economic slowdown or shift away from discretionary spending.

Block or any other payments company likely wouldn’t be totally insulated from recession, especially if people directly depositing paychecks stop receiving them. It also raises the question of who Cash App’s biggest users are—more economically stable ones, or people who might be among the first to be hit by inflation and job losses. If current trends keep up, though, Block could stand out among fintech stocks in tougher times.

This story has been published from a wire agency feed without modifications to the text

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