Square Posts Strong Growth for Cash App, Its Entry in the Hot P2P Payments Market

Square Inc. is rapidly growing into a heavyweight player in the hard-fought market for peer-to-peer payments. The San Francisco-based company had 15 million active users in December for its P2P product, Cash App, a number that doubled from December 2017, the San Francisco-based company disclosed on Wednesday.

That’s still well behind the 100 million consumers using the bank-controlled Zelle service, but the growth in Cash App is particularly gratifying for Square as it plays into the company’s emphasis on financial services for both consumers and merchants, Square executives said during an earnings call to discuss fourth-quarter 2018 and full-year results.

Cash App, which links to a Visa debit card to let users spend funds at merchants, competes with PayPal Holdings Inc.’s fast-growing Venmo service, in addition to Zelle.

“I’m very pleased with the progress we’ve seen [with Cash App],” Square chief executive Jack Dorsey told analysts on the call. “Cash App is now achieving mainstream scale. We see a massive opportunity ahead of us in financial services.” Dorsey cited “strong engagement” with Cash App in terms of transactions per active account, though he did not disclose a number.

Square no longer releases the volume of spending on the Cash Card, though it stood at $3 billion annualized as of the second quarter, the last period for which the company disclosed the statistic. “I’m really proud of how far Cash Card has come,” Dorsey said Wednesday. “It was a major bet for the company. It enables us to move superfast with other products.” One such product is Square Card, a business Mastercard aimed at Square sellers that Dorsey said was easier to roll out with the experience earned on Cash Card.

Square’s ambitions in financial services run even deeper, as indicated by its interest in breaking into banking. In December, it refiled its application for an industrial-bank charter. It originally filed an application with regulators in Utah in September 2017, but withdrew it in July last year in the face of withering opposition from the banking industry. “We look forward to more direct relationships with regulators,” Dorsey said Wednesday.

As for Square’s original business—providing point-of-sale equipment and processing for small merchants—evidence is emerging that the company, once known for serving flea-market sellers and other micro-merchants, is steadily attracting a larger clientele. Some 51% of its processing volume in the fourth quarter came from what it calls larger sellers, those doing $125,000 or more in annualized volume. Still, that figure was 52% in the quarter ended Sept. 30.

For the quarter, Square posted $933 million in net revenue, up 51% year-over-year. For the full year, net revenue totaled $3.3 billion, up 49% from 2017. Excluding 2018 acquisitions, total net revenue was up 46%. The 10-year-old company posted a loss for the quarter of $28 million after enjoying its first profitable quarter in the previous period.