Cash App's BNPL Drives User Growth and Lending Volume

Block (NYSE: SQ) has successfully onboarded one million consumers to its post-purchase Buy Now, Pay Later (BNPL) feature within Cash App since its introduction in February. This rapid adoption underscores the growing consumer appetite for flexible payment options and bolsters Block's strategy to transform Cash App into a comprehensive financial platform. The BNPL offering has achieved an impressive annualized lending run rate of $2 billion.

Strategic Expansion in Consumer Lending

The success of Cash App's BNPL is a key component of Block's broader financial ecosystem strategy. The company is actively "ramping" the number of cardholders eligible for post-purchase BNPL loans throughout 2025, according to Block CFO and COO Amrita Ahuja. This expansion is designed to further integrate the company's offerings, including the Afterpay BNPL service, which Block acquired for $28 billion in 2023. Ahuja highlighted that the Cash App card, particularly with its Afterpay integration, is evolving into a "next-gen credit card with transparency and upfront understanding of fees that don't trap our customers in (debt) death spirals." This vision directly addresses the perceived shortcomings of traditional credit products, resonating particularly with younger demographics.

Innovative Underwriting and Market Positioning

Block's approach to consumer lending, including its BNPL and Cash App Borrow products, distinguishes itself through an innovative underwriting model that minimizes reliance on traditional credit scores. By leveraging near real-time data such as paycheck deposits, spending habits, and cash flow patterns, Block can assess creditworthiness more inclusively. Internal data suggests that a traditional credit bureau approach for Afterpay would have excluded approximately 13% more customers at the same risk level. Similarly, for its Square lending model, Block approved 88% of applicants at a fixed loss threshold, compared to 54% using a traditional score. This data-driven strategy has enabled Cash App Borrow to maintain repayment rates above 97%, even with 70% of its active users having credit scores below 580. This demonstrates Block's ability to responsibly serve segments often overlooked by conventional lenders.

Financial Performance and Ecosystem Synergy

The rapid growth in Cash App's BNPL segment contributes to the platform's robust overall performance. The commerce category, which encompasses Cash App's various products and Afterpay, saw a 16% year-over-year growth in the second quarter of 2025. Over the past year, this category generated $183 billion in customer spending volume. Block's strategic move to shift Cash App Borrow's short-term lending product to its own bank, Square Financial Services (SFS), following federal regulatory approval in March, is expected to further improve margins by lowering funding costs. This integration aims to create a "flywheel effect," driving incremental demand from Cash App consumers into Square merchants, thereby deepening connections across Block's dual-core ecosystem.

Future Outlook and Industry Implications

Looking ahead, Block anticipates further financial benefits from the debit card-Afterpay combination in 2026. The company plans to launch several new products in 2025 to sustain business momentum and continue its focus on underserved demographics. While Block's innovative credit model and ecosystem expansion position it for sustained growth, the company acknowledges potential challenges, including ongoing regulatory scrutiny of BNPL and crypto assets. Nonetheless, the successful adoption of Cash App's BNPL feature signals a significant shift in consumer lending, pushing traditional financial institutions to re-evaluate their approaches to credit assessment and customer engagement in an increasingly digitized financial landscape.