Former deposit operations lead at Square Inc
- Operating environment for Block’s (NYSE: SQ) Cash App, discussing normalised account growth post-stimulus and other pandemic-related tailwinds
- Cash App’s ability to monetise users and drive ARPU increases through additional product offerings
- Cash App’s positioning vs Paypal’s (NASDAQ: PYPL) Venmo, Chime, Aspiration and others
- Afterpay acquisition roll-out and impact on Cash App – could Block combine Cash App and Seller into a two-sided network?
- Outlook for 2022 and beyond, including potential for longer-term meaningful international expansion
What are your thoughts on the current operating environment for Cash App and other neobanks or challenger banks, and could you highlight a couple of different key trends or drivers you think we should pay attention to?
What are your thoughts on the general competitive environment for new users? I think there are a lot of different providers that have tried to create a super app of sorts, albeit coming from different beachheads. How is Cash App’s strategy different vs other wallets or digital banks? Why do customers pick Cash App? Is it attracting certain segments of the market?
How do you think about the impact of competition from Chime and the company moving more toward an open peer-to-peer network? It has an option to pay anyone and you can use the member’s Chime sign. Even non-members can claim to their bank account, and there’s no app needed.
Would you argue Cash App has the leading prospects to become a super app? If so, who’s number two or three and why?
How do you think about account growth from here on out for Cash App, given you mentioned many tailwinds are no longer behind us? If we’re at around 44 million active users today, what does that look like over the next 1-5 years, and why?
Could you elaborate on the other levers Cash App could pull to drive more account growth? I know there has been talk about a closed-loop seller Cash App ecosystem, where you could give incentives to people paying with their cash card or Cash App, which would also help the economics of that transaction for Square.
When you think about the account growth to date, I think one of the qualms or criticisms has been Cash App has been predominantly serving unbanked or under-banked populations, presumably customers with a lower lifetime value. What are your thoughts on whether the app will be able to successfully move out of that demographic to higher-lifetime-value-type customers over time? What does that look like from a customer acquisition perspective?
Do you think there’s a risk that Cash App has captured the easy customers, and now it will have to go after less profitable or even harder-to-attract customers? It mentioned CAC [customer acquisition cost] moving from around USD 5 in 2020 to about USD 10, as it manages the business with a lifetime value/CAC target of 6x. Might there be structural challenges going forward that’ll impact CAC without necessarily translating into a higher lifetime value to CAC ratio?
If CAC for Cash App is X today, does it go to Y to Z over the next 3-5 years?
When you think about Cash App users using it as their primary account vs just having the app or using it for one or two features, how would you compare that vs Chime, where perhaps the numbers are a bit murkier as well?
What’s your take on each of the product offerings within Cash App? How do you think about relative attach rates, ARPU and the gross margin contribution of the existing product set? How do you think this will shape up over time?
In the Q4 2021 earnings call, management mentioned Cash App had four revenue streams of more than USD 200m in gross profit. Is it fair to assume these streams are Bitcoin, the card, investing and peer-to-peer? If so, how do you think about Cash App’s longer-term monetisation potential? How far does it get?
I think management has commented that Cash Card active users generated about 5x more gross profit per active user compared to peer-to-peer-only users. It seems there’s definitely more of a monetisation aspect there, but what might the engagement increase look like for Cash Card users?
Where do you see the roof in terms of Cash Card penetration for the Cash App customer base? Of the around 44 million Cash App customers, if 31% are using Cash Card – and that has been improving over the last couple of years – what does that get to? Could you comment on the economics of a Cash Card user vs non-Cash Card? How much does it cost to convert customers to Cash Card, or is it more or less organic?
I think you touched on the interchange rate for Cash Card, but could you break down the associated processing costs? Do you see any risks on the horizon as it relates to debit interchange getting pressured, regulatory or otherwise?
How should we think about the relationship between Cash Card users and instant deposits, so taking money out of the Cash App account into a different checking account, but paying for that to be sped up? The thought being, if they’re going to spend via Cash Card, perhaps there’s less of a need to transfer funds back to their banks. Could you discuss the percentage of revenues from instant deposits for Cash Card users and whether that’s substantial or if it completely rolls off?
How do you think about the volatility of certain revenue lines associated with Bitcoin? I know this has been a concern with Robinhood and other very transaction-dependent firms. Why is Square just allowing transactions or trading of Bitcoin instead of other currencies on the platform?
Do you think Cash App’s 2% fee for buying Bitcoin is sustainable? By not offering other crypto assets on the platform, might that become a barrier to attracting customers?
Where do you see the potential for new products for Cash App? What are the logical adjacencies? How do you think about realistic ARPU targets when considering the product roadmap?
What do you think adding buy now, pay later will add in terms of ARPU? If Cash App is able to roll out a different type of lending product, what does that do in terms of the average ARPU or even gross profit per user over time?
Where else do you see product adjacencies for Cash App? Do you think the company could roll out some sort of robo-wealth-management-type offering, or insurance, larger lending products, auto or mortgage offerings over time? How do you think about the cadence at which we may see some of these new features roll out? Could it be one or two per year?
How do you think about the timeline we’ll see for Square’s rollout of Afterpay? How might Square be thinking about Afterpay more broadly and international benefits here or otherwise?
Is there anything we didn’t cover that you’d like to touch on, or perhaps anywhere where you hold a contrarian view vs some of the narratives out there? Is there anything you think is commonly misunderstood by the investment community?
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