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Square’s Cash App continues to scale the bitcoin hype wall

  • Bitcoin prices are up over 100% year to date.
  • Square's Cash App is riding those prices higher as it sees record bitcoin revenues.
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Square’s Cash App continues to scale the bitcoin hype wall

As bitcoin prices ramp up at the end of 2020, Square has solidly benefited from renewed interest in the cryptocurrency. The firm's Cash App continues to deliver on bitcoin trading revenues, growing profits 212 percent year over year.

square cash app profits
Source: Square

In an effort to drive higher engagement and monetization, Square has added ancillary features to the popular app beyond peer to peer payments, like stock trading and a debit card. Those efforts are beginning to bear early fruit. The company is clearly focused on getting more users to download the app and giving them more reasons to spend time and money using the app.

The Cash App ecosystem

Cash App is benefiting from a growing ecosystem as customers adopt multiple products. The company is working to expand the number of users of Cash App through national marketing campaigns. Once they've downloaded the app, Square's strategy is to continue to roll out products to keep them in the app. With a debit card, direct deposit, and stock brokerage, the strategy seems to be paying off, as KPIs point in the right direction.

cash app users
Source: Square

In the third quarter of 2020, the number of average daily active Cash App customers nearly doubled from the same period last year, representing nearly a quarter of monthly transacting active Cash App customers.

Square measures net inflows -- essentially, stored money -- into Cash App as a metric for growth. As of the end of the third quarter of 2020, Cash App customers had more than $1.8 billion in cash balances stored in their accounts, up 180% year over year and up 7% quarter over quarter as stimulus disbursements ended during the third quarter.

By adding in additional ways to spend, send, store and invest their money, Cash App users are transacting more in the app. During the third quarter, customers with two or more Square products, like Cash Card or direct deposit, had 3-4x more transactions and generated 3-4x more gross profit compared to customers who only used P2P payments.

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Stock brokerage saw the fastest adoption of any Cash App product. Since its launch less than a year ago, more than 2.5 million customers have bought stocks using Cash App, and billions of dollars had been traded by the end of the third quarter. Square launched Auto-Invest, which allows for dollar-cost
averaging from recurring daily or weekly purchases of bitcoin or stocks.

While Square offers its stock brokerage product for free, these customers tend to be more engaged. Stock brokerage customers had 28% more transactions across the platform and generated 15% more gross profit after they adopted stock brokerage.

Square card spend
Source: Square

Square Card is the firm's new business debit card, providing
sellers with a way to immediately access and spend their earned funds. Adoption of Square
Card has increased each quarter since it launched, and this quarter more than half of Square Card sellers ordered their card within the first month
after onboarding. In the third quarter, more than $250 million was spent by sellers through Square Card, or approximately 34% of these sellers’ gross payment value, for daily expenses like purchases at gas stations, discount retailers, and other places.

Cash App for Business

Cash App has made it easier for people to manage a business by enabling payments to their Cashtag, allowing higher weekly limits, and providing
tax reporting forms. These business customers have been engaged and transacted more frequently, strengthening the Cash App network. Square helped customers adapt during COVID-19 by providing a way to accept contactless payments across commercial categories like beauty and online retail, as well as contributions to shuttered local businesses.

The company also saw peer-to-peer customers get creative with how they do commerce by switching to Cash for Business to sell items such as thrifted clothes or handmade masks.

Square Capital

Like most lenders during the pandemic, volumes are down big time from last year. Square Capital paused new flex loan offers until the end of July, resuming in August and September. Square Capital facilitated approximately 35,000 loans in the third quarter of 2020, totaling $155 million, down 72% year over year.

Bitcoin revenues

Cash App generated $1.63 billion of bitcoin revenue and $32 million of bitcoin gross profit during the third quarter of 2020, up approximately 11x and 15x year over year, respectively. Bitcoin revenue and gross profit benefited from an increase in bitcoin actives and volume per customer.

Marketing

Square is targeting to reach more than 50 million people in the U.S. through its campaigns in the second half of 2020. Square has traditionally seen positive ROI on its paid advertising spend within 12 months. As the Cash App ecosystem is growing, the company is betting it can recoup its investment quicker and grow revenues larger over time given a flywheel effect.

cash app advertising
Source: Square
cash app ads
Source: Square

Square first started running paid ads for Cash App about a year ago. The company is seeing ARPU and lifetime values go up 3x over the past three years. Square ramped paid marketing for Cash App in the third quarter and into October across a variety of new channels.

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