Block, the financial technology company led by Jack Dorsey, is doubling down on consumer lending as it seeks to reignite growth following a challenging year. On Thursday, the company announced it had secured approval from the Federal Deposit Insurance Corporation (FDIC) to issue loans directly through its banking subsidiary, Square Financial Services. This move allows Block to expand its Cash App Borrow service, offering small-dollar loans nationwide without relying on external banking partners.
The decision comes as Block faces a 33% decline in its stock price this year and slowing revenue growth. Last month, the company reported disappointing quarterly results, with revenue increasing just 4.5% year-over-year, leading to an 18% single-day stock drop—its worst since 2020.
Expanding Cash App Borrow
Cash App Borrow, Block’s short-term lending product, provides loans typically under $100 with an average duration of about one month. The company claims the service is designed to offer a simpler and more affordable alternative to traditional short-term lending options. However, the expansion comes amid rising concerns about consumer credit risks, including economic uncertainties tied to tariffs and government job cuts.
Block’s lending segment has also faced challenges, with transaction losses jumping 39% last quarter. Despite these risks, the company asserts that its underwriting model is robust and well-suited to manage the inherent risks of small-dollar lending.
Strategic Moves and AI Investment
In addition to its lending expansion, Block is making strategic investments in artificial intelligence. On Wednesday, the company announced plans to deploy Nvidia’s latest Blackwell AI systems to power open-source AI research. While Block did not specify the exact applications of this technology, it hinted at exploring innovative solutions to enhance customer experiences.
Block has also been integrating Afterpay, its buy now, pay later (BNPL) service, into its ecosystem. Last month, the company rolled out Afterpay on the Cash App card, providing customers with more flexible credit options. Block acquired Afterpay in 2022 for $29 billion, positioning itself as a competitor to Affirm in the BNPL space.
Challenges Ahead
Despite these efforts, Block faces significant headwinds. The company’s stock has struggled amid broader market volatility and concerns about its growth trajectory. The expansion of Cash App Borrow and its AI investments signal Block’s commitment to diversifying its revenue streams and staying competitive in the fintech space. However, the success of these initiatives will depend on Block’s ability to navigate economic uncertainties and deliver value to its customers.
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