Cash App may be turning into the product that ate Square Inc. The company on Wednesday reported a big fourth quarter for the 4-year-old product as officials pointed to a strong performance overall for the full year. “2019 was a very good year for us,” Square chief executive Jack Dorsey told stock analysts in what was something of an understatement.
Cash App, which boasted 24 million monthly active users at year’s end, accounted for fully 27% of Square’s gross profit in the quarter, according to chief financial officer Amrita Ahuja. That result underscores the app’s strategic importance to Square as a product that links two customer bases usually seen as separate camps—merchants and consumers. “We’re in the incredible position of scaling up two ecosystems,” Dorsey said on the earnings call, referring to the feedback loop that allows the app to add sellers as it attracts consumers. And the app is growing fast, with active users up from 15 million at the end of 2018 and 7 million at year’s end 2017.
Cash App enables users to pay others and request payments from them. It also features the ability to buy Bitcoin as well as fractional shares of stock. The app’s companion product is a Visa debit card, called Cash Card, which one-fifth of the app’s users have now adopted, according to Ahuja. All told, excluding its Bitcoin proceeds, Cash App rang up revenue of $183 million in the quarter, accounting for 14% of the company’s total revenue for the period.
As products like Cash App build momentum, Square is moving to keep cash sloshing around within its own systems. The company last month raised the fee from 1% to 1.5% for instant transfers from seller accounts to bank accounts. The move, Dorsey and Ahuja said, is possible because sellers can make instant transfers to Square Card, a Mastercard-branded product. “Square Card keeps money in the Square ecosystem,” Ahuja told the analysts.
Still, the company plans to keep an eye on the reaction among its merchants to the rate increase. “We’ll continue to monitor” the impact, Ahuja said.
The company’s nearly constant interactions with banks and introductions of bank-like products led it a few years ago to seek a charter for an industrial-loan corporation, a form of bank. The idea was that a financial institution would help with services like Square Capital, which lends to small businesses. But in 2018 Square withdrew its application to the Federal Deposit Insurance Corp., and on Wednesday Dorsey said there is “no update on the ILC,” adding that “we have focused on other considerations.”
Nor does he see an immediate place for a Square-controlled bank to help with products like Cash App. “I don’t believe that would be the case,” he told an analyst who asked about the pursuit of a banking charter. “I’m really happy with our progress and speed and ability to work with partners to create a compelling customer experience.”
Square finished the quarter with $1.31 billion in net revenue, up fully 40% year-over-year. Its Bitcoin business has turned into a material moneymaker, accounting for $177.6 million in fourth-quarter revenue, or nearly 14% of total revenue. For all of 2019, total net revenue came to $4.71 billion, up 43% over 2018. Bitcoin revenue added up to more than half a billion dollars.
Notably, net income came to $375.4 million last year, compared to losses of $38.5 million in 2018 and $62.8 million in 2017. Much of that 2019 profit, however, resulted from Square’s fourth-quarter recognition of proceeds from the sale of its Caviar food-delivery unit to DoorDash.