Former divisional leader at Cash App Investing LLC (Block Inc)
- Operating environment for Block’s (NYSE: SQ) Cash App, noting user growth trends
- Cash App’s competitive positioning vs P2P players such as PayPal (NASDAQ: PYPL) and neobanks such as Chime Financial, plus potential competition from Apple (NASDAQ: AAPL)
- Cash App’s broader product strategy and knock-on effects of new service lines for user economics
- Block’s broader aspirations in marrying the Square merchant business with Cash App’s monetisable user base
Can you start with a brief overview of Cash App’s operating environment, pulling out 2-3 key trends or drivers we should monitor?
Where is Block’s integration of Afterpay at today, and how do you see merchant adoption trending over the next 1-5 years?
How will the Afterpay integration impact the growth prospects for Block’s merchant base? If it’s trending at X today, how might it trend to Y over the next few years? What impact or adoption will we see from the integration?
What might Afterpay adoption be in a few years after Block starts to integrate it, in terms of its percentage contribution to transactions on the Cash App side?
What would be the difference in the gross margin per user between a standalone Cash App user for its core basics vs one that might use the Afterpay purchase option?
Is there a ceiling in terms of adoption and any nuance in specific verticals or channels? At maturity, will there always be more buy now, pay later transactions on the e-commerce side vs in-store and POS [point-of-sale]? Are there any verticals you think buy now, pay later is more suited to? I’m thinking of low to high AOVs.
Buy now, pay later more broadly has become a huge topic of discussion in the last two years. How would you rank the Afterpay offering’s competitiveness being embedded in Block’s broader ecosystem vs some pure players such as Affirm or Klarna? Some specialists argue that buy now, pay later as a component of a larger ecosystem, whether through Block or PayPal, has some structural advantages over pure players. What’s your take on that?
Do you think the buy now, pay later offering will meaningfully impact or improve customer or user retention?
What are Cash App’s aspirations in the cryptocurrency market? What adoption have we seen in the existing user base and how do you see that trending?
Out of the 44-46 million Cash App users today, how many use it for some function of Bitcoin trading, and how do you see that trending over the next 1-5 years?
If there’s the 2% fee on Bitcoin trading today, what compression are you expecting over the next few years?
How do you view the competitive environment for new user growth given many pandemic tailwinds are behind us, such as super-outsized digitisation and the stimulus payments?
How would you grade Cash App’s ability to walk up the income bracket spectrum and capture some of the higher-lifetime-value users that would use more traditional financial institutions?
On Cash App’s international expansion, how can we rank the regions it will prioritise? It has already made moves in Europe. I’m thinking of regions such as LATAM, and I know there are higher penetrations of mobile phones and digital banking in Africa. What are your thoughts on potential markets for Cash App?
Tying together all the growth initiatives you outlined, how does that influence your user growth expectations over the next 1-5 years? We’ve highlighted Cash App is already near 46 million accounts today. What does that look like in 2023-25?
Is there a base-case assumption or any other assumption for your prediction of 60-70 million Cash App users? What user count spread would you expect if it were to pursue deepening the lifetime value vs expanding internationally?
How do you see CAC [customer acquisition cost] trending? If we’re at around USD 10 per user today, as of the last reported numbers, what Y value do you expect, given increasing competition, but also perhaps more sustainability in Block’s business model compared to some newer competitors’?
Could you discuss Cash App’s aspirations towards getting super app status? It seems many financial services providers have ambitions of doing this, albeit coming from different beachheads. What are your thoughts on the company’s main competition today and in the future, and its relative positioning against competitors such as PayPal, Chime or any others you’d be willing to highlight?
Apple is starting to play its hand in terms of expanding financial services. Do you think it’s a factor in this conversation?
We discussed the Afterpay integration being a channel for marrying the seller vs Cash App ecosystem, but what other channels or levers can Cash App pull to combine these two ecosystems? How do you see it prioritising these initiatives?
What is Boost’s merchant adoption rate? How does the Boost portion affect the economics between the merchant side and the Cash App user base?
For Cash App’s user base, what does ARPU look like in 3-5 years, and what assumptions are driving that?
Can you outline some best- and worst-case scenarios for Cash App’s performance over the next few years? Are there any wildcards on the horizon that could lead to underperformance to some degree? How might the broader macro picture influence this?
Is there anything else about Cash App worth highlighting that we haven’t covered, or do you have some closing remarks?
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