Hey everyone. Thank you for joining On the Block number four. We're here with Owen Jennings. Before getting started, a quick disclaimer. Today's discussion may include forward-looking statements regarding our strategy, guidance, and long-term goals. Actual results may differ materially due to risks and uncertainties described in materials filed and furnished with the SEC. These statements speak only as of today, and we undertake no obligation to update them except as required by law. Reconciliations of any non-GAAP financial measures that we discuss to the most directly comparable GAAP measures are available in our shareholder letter. Further, any discussion of our lending and banking products refer to products offered through Square Financial Services or our bank partners. Okay, with that out of the way, pumped to have Owen back On the Block.
This is our official number four, which we started with Jack, but people that were with us earlier on some of the Twitter streams and other live streams that we've done randomly through Google Meet knows that Owen is the OG of On the Block, even though this is his first, technically, time on here. We're really excited to have you here, Owen. We had a lot of really good questions submitted and really excited to dive into them. Based on those, we're going to spend most of the call, or almost all of it, on the product roadmap and not on past quarter's financial performance, which I think is great. I do think before getting to the questions, it's just worth calling out the financial performance we've delivered this past quarter, which I thought was pretty exceptional.
Just for everyone's awareness, Cash App gross profit, Square gross profit, Block gross profit, all accelerated. Block gross profit grew 27% year-over-year. Square GPV accelerated. Cash App monthly actives grew at the fastest pace in 18 months. Commerce enablement volume growth and consumer lending originations growth accelerated. Adjusted OI margins expanded five percentage points. We grew Adjusted Diluted EPS over 50%. We raised our guidance for the full year across gross profit, Adjusted Operating Income, and Adjusted EPS. I could go on and on, but anyway, suffice to say, it was a really good quarter, and I think a lot of that strength is from the product work that Owen and team and many others at Block do. Let's get right into it. Owen, this is probably one of my favorite questions that was submitted.
We'll get into some specifics from here, but first question I have is that you've posted that you personally use Block products a lot. What's the best insight or improvement that you using these products has provided to you as you build products?
Interesting. Appreciate the question and love that. Thanks for all the questions that were submitted on Twitter. I use Cash App, Afterpay, Tidal, Bitkey, Square every day, if not every week. If you're working on the product side or the design or engineering side, you kind of have to live and breathe the products. It helps not just from a what we should build perspective and kind of building that pattern recognition, but I also find some bugs and small improvements from time to time. I wish I could say, "Yeah, based on my usage of the products, I had the idea to instantly move money between bank accounts, and that's how Cash App was born." It's more so just a lot of small things that compound.
Recently, like this past weekend, my wife and I were testing Afterpay for peer-to-peer, Cash App Afterpay, and we were going through that flow and Kelly was like, "Hey, you should make it clear that the person for whom the peer-to-peer payment is for isn't going to know about this at all." I sent a quick note and we fixed that really quickly. Similarly, I've been using the managed accounts feature that we just rolled out on the Cash App side, and I was like, okay, for a six or seven-year-old, we want the allowance to just automatically go into high yield savings. You don't have to open that up and then move it. There's a lot of small things like that.
Spent a lot of time with Miles and Thomas on some of the Bitcoin flows, like dollars on Lightning, and I want to be able to use the Bitcoin network, but I don't personally want to spend my Bitcoin, or the transition between Bitkey and Cash App, and how do you make that feel as seamless as possible, even though obviously fundamentally different applications. Probably the biggest one was all the way back in the early days of Cash App, when essentially we had peer-to-peer and we had the Cash App Card, and a key question for us was how do we incent the usage of Cash App Card at the top of the wallet?
This was back in late 2017, early 2018, and I spent a lot of time on this problem and a lot of time talking to younger folks, and out of that came the concept of Boosts and instant discounts and I think the first offer that we had was $1 off coffee, and it was just like what is the simplest, easiest way to build a rewards program that's really going to resonate with the average American? That's transformed into everything that we've built in the entire offers platform since then.
Awesome. This wasn't planned. Cash App managed accounts, my six-year-old's also a big fan. This is her card, nice and pink and hearts and glitter and everything. It's a pretty sweet product. If you haven't checked it out, highly recommend.
The card design element was maybe appreciated by some, but I've been seeing a ton of feedback from people I know personally, but then also just on social media and that experience of getting to choose your card and then design your card and sit down with your kid is an incredible moment. I'm really stoked for this one.
Yeah, it was awesome. We both had a blast doing it. All right, getting into more specifics, one of the things that came up a lot in the questions was Neighborhoods. I'll quote one, which is just, "Neighborhoods, Neighborhoods.
Your baby said that we have to read them verbatim here.
Exactly.
It's a good question.
This one actually wasn't in here, but I think it's worth just reflecting on what Neighborhoods is. I get a question a lot of, why do people care about this? Or what's the seller value proposition or the customer value proposition? Before getting into some of the specific questions that people submitted, maybe just a minute on how we constructed Neighborhoods as a product and why we're so excited about it.
Yeah. Maybe I'll step back and just talk about the landscape. I think overall, I talk to business owners, restaurant owners quite frequently, and I think the recent quote, I think a handful of months ago, was, "It's getting nearly impossible to run a restaurant," and really a small business in general, in the U.S. I think there's a bunch of things that are contributing to that. One is just margin pressure. The cost of goods sold are going up, the cost of labor is going up. Generally, the top thing that a seller wants to do across verticals, across geographies, is drive incremental top-line growth, either through average order value or through attracting new buyers or deepening engagement with existing buyers. That leads them down this path of, how am I going to talk to my customers?
How am I going to drive engagement? For the most part, the small businesses that make up the backbone of the U.S. economy, the global economy, they don't have the same tools that the big box retailers and big box QSRs have. I'm running Owen's Coffee Shop, I don't have a tech team that's building a Starbucks app that's one of the top QSR apps that's out there. Your options end up being either you can go to a white label tech team and pay a whole bunch of money and build an app, or you can rely on the DoorDashes and Uber Eats of the world. I think on the first one, that's really expensive. Most sellers are not in a position to do that.
Two, from an experience perspective, you end up competing with this almost infinite number of potential small business apps that could exist on a customer's phone, and it's not natural that the customer is opening up those apps all the time. On the DoorDash and Uber Eats side, obviously tremendous value added to a given seller, but there is this dynamic where a seller can get addicted to the growth that's coming from that platform, and then obviously they have to give away a large share of the economics to those platforms. You're in this place where margins are further compressed, and maybe that leads to just massively raising prices on the platform. There's this difference between your core prices relative to the prices on the platform.
The bottom line is there's not a great solution to actually compete as a small business, that is fundamentally the problem that we're trying to solve for sellers. With Neighborhoods, what you get is, one, every single Neighborhoods transaction, you're paying a 1% fee. Massive benefit, especially when you think about the margins of the average small business. Two, you're building a following. Every time that a given buyer comes into your store or orders online or what have you, they have the opportunity to become a follower. What that means and what that feels like is within Cash App, I actually have a dedicated applet for that small business. I have dozens of small businesses on my phone that I am following. This allows for order ahead from the buyer. It allows for lower transaction fees for the seller.
I think the critical piece here is it allows for marketing, and it allows for marketing in a really targeted way, where let's say a given seller has 3,000 or 4,000 followers, and let's say Wednesdays tend to be pretty slow in the afternoon. You can push out a notification to somebody's Cash App that says, "Hey, Owen's Bagels, we're doing whatever, half off pumpernickel on Wednesdays," and drive that demand. We're doing that in the way where sellers keep all of the economics, and we're able to build that unit economic system because we have both sides of the counter and because we monetize in other ways. It's incredibly seller-friendly. It's way better from a consumer perspective. I can go from 35 small business apps on my phone that I'm not always in or whatever to I'm managing this thing within Cash App.
Obviously from a Block perspective, it's kind of like a win-win-win. We're able to make Square more attractive relative to the competitive set. We're able to drive a tremendous amount of acquisition into Cash App. I do feel like this is the next chapter of Block, where we're actually talking about the Block ecosystem overall, we've gone from a place where we talked about it for a while, we had spits and starts with Square Wallet and Square Order, to we're testing it, to we're at the place now where we clearly have market fit and we're in the process of scaling it's going to accrue really positively from a business perspective on the Square and Cash side, also for small businesses and for consumers. That's the backdrop of what we're trying to create.
How will you measure product and economic success for Neighborhoods? What should investors look out for to get a better understanding of its trajectory?
Right now we're in the scaling phase, the way that I think about it is for every S-curve, you can visualize an S-curve in your head, but we're just at that point where you start to kind of inflect vertically. I think it's really about scaling and distribution now. I talked about this a bunch on earnings and in investor meetings in Boston last night. Expanding across audiences, expanding across hardware types, getting the go-to-market motion right for smaller sellers, for larger sellers, et cetera. I would be looking at locations that are live. I would be looking at the share of GPV or processing volume that's enrolled into Neighborhoods, and then I'd be looking at active buyers. Those buyers can either be earning rewards or actually ordering from within the Neighborhoods product.
From an impact perspective, if I were an investor, things that I would be looking at is like. One, what's happening to our win rate, especially on the sales-led side for Square. This is like a superpower relative to the competitive set. There's no other player out there that has a buyer base at the scale that Cash App has and is able to build this. This is like a huge superpower. Then I'd be looking at new volume added and new profit added. Then for existing sellers, obviously, two years from now, if you're in a place where you have 40,000 followers on Cash App and it's contributing X% of your top line because you're able to do this marketing, it's going to make it a lot harder to churn. It's like, "Oh, we're going to get five bips off my processing rate.
The value that I'm getting from Neighborhoods is way higher." I would look at retention as well. All of those things take time to bake as we increasingly distribute the Neighborhoods product.
On the Cash App side, some things I'd be looking at is obviously just actives. One of the key benefits of this is we're driving a bunch of new actives into Cash App. What I talked about in earnings is about half of the buyers who are enrolling into Neighborhoods are either net new to Cash App or they're lapsed customers who we're kind of winning back. That's extremely attractive for us. Obviously, also looking at commerce volume. If there's a reasonable attach rate of Neighborhoods onto the annual pace of Square GPV, that's really meaningful. Another dynamic that maybe we haven't talked about as much is just I'd be looking at non-core demo expansion. In some of these geographies, Square density is inversely correlated to Cash App density. Think about certain neighborhoods in L.A. or San Francisco or New York or what have you.
What this means is that Neighborhoods is going to be an acquisition channel overall across the entirety of the U.S., and this means that it will naturally drive Cash App acquisition in some of our non-core demographics. Right now, Cash App skews younger. It skews towards the Southeast. It skews lower income. It skews non-white. If you think about Square sees basically roughly every adult in the U.S. multiple times a year. That's kind of the scale that you're talking about. All of these investor conversations we've been having, rightfully so, for the past couple of years have been around network expansion and actives growth. I can easily see a world in X amount of time where we're not really talking about network growth anymore. It's more like, how are you engaging with these buyers, and what are the products that you're building for them?
It's entirely possible that there's some customers who are going to join Cash App who they're not going to have the exact same cross-sell, upsell, attach rate story as what we've seen in the past, where it's like you have Instant Deposit, you have Cash App Card, you have Borrow, you have Afterpay. This gives us an opportunity to build just generally for everybody in the U.S., and hopefully other geographies as well. It really increases the aperture of the potential roadmap, which I'm incredibly excited about as we look at the years ahead.
I think one of the things that Block has done brilliantly over many years since Square's founding 16, 17 years ago now is just find really unique wedges for customer acquisition. The initial Square dongle, such a viral, cool, what the heck is that product? On the Cash App side, there was obviously the peer-to-peer network initially. It feels like Neighborhoods is one of those things that it just drives such a unique, interesting, novel way to get customers into Cash App and then discover everything that we can do for them there while delivering.
Yeah
margin hours for sellers.
Here's my basic worldview is that, so I have two young kids. I think that there's this race for the consumer digital bank account, and it's going to play out over the next, call it five to 10 years. I don't need to go into the specifics, but you have certain players who are vying for that who have a wedge on the investing side, certain players who have a wedge on the crypto side, certain players who are coming into the U.S. market. I think when you think about distribution advantages, some of these folks might be playing the game of $100, $200 CACs on Meta and Google and what have you, and that's fine, and that works, and great businesses have been built that way.
It's just such an inherent advantage to be able to leverage the network effects of peer-to-peer or the viral free form factor of the, I don't think you should say dongle, I think you should say reader. Neighborhoods as well is just another incredible acquisition channel that we have. I don't think it exists at all for face-to-face commerce. There's some other players where you can argue for online commerce it exists, so just a huge advantage for us.
Yeah. As you mentioned, Neighborhoods is scaling, or in the early innings of scaling, but what have been some positive surprises or unexpected outcomes so far?
Well, there's been a lot. This has been the full focus for a bit of time here for Brian. Brian was the founder of Cash App. He was the CEO of Cash App for quite some time. He was my boss for quite some time. He's an incredible product thinker, there's been tons of discoveries and kind of interesting things over time. Most recently, maybe just two things to call out. One, we just started rolling Neighborhoods on other hardware form factors. Right now, Neighborhoods kind of works best on Square Register, where you have the seller-facing, Oh, I have one right here. You have the seller-facing display and the buyer-facing display. We want that to work across all hardware types, we just started rolling it out on Terminal.
Actually, my expectation was like, we might see a completely different attach rate there, just given what the buyer-seller interaction looks like. That's not the case at all. It actually looks pretty comparable, so that's great. I also thought I had confidence in the ability to attach a buyer at the point of sale, because we had worked a lot on that flow and it was working well, and we were seeing the cohorts progressively get better. Just seeing that translate into subsequent ordering activity from within Cash App, was also a surprise. I think that's a behavior that we can really lean into and invest in more in the coming weeks and months.
There'll be a couple other, I'd say, connecting the ecosystems type questions that are adjacent to Neighborhoods. I'll put them in here. First one, Commerce was said to be connecting Afterpay and Square sellers into Cash App. Has that been replaced by Neighborhoods or are there still plans for e-com in the app? If so, what timeline, and if not, what's changed?
I think it's probably a mixed answer. I think our thinking has definitely changed just in terms of how all these pieces fit together, and there's been some learnings along the way. I think one trend that we've seen over the past five years is just out of network is an absolutely massive opportunity, and we're already seeing that with Cash App Afterpay and Afterpay on the Cash App Card. In the early days when we were having conversations with Nick and Ant, I think out of network was much less of a story, and it was more like, how are we continuing to build the network of merchants who accept Afterpay? I think pretty soon it's going to be customers who have the Cash App Card, fourth largest debit program in the U.S., can Afterpay wherever they want.
That's interesting, and that leads you to build different things relative to an in-app shopping experience. I think second is really what's your wedge and what's your right to win in terms of a customer starting their shopping journey in your app? We had a test a few years ago for an offers tab, and basically, we would kick off your shopping journey from within Cash App and the primary kind of reason to do that was getting an instant discount, whether that was with Cash App Card or Cash App Pay or Afterpay. That performed reasonably well, but I think as like a top-level tab within Cash App, it didn't have massive engagement. I do think that the wedge is completely different with Neighborhoods, and that's why I'm excited to invest in Neighborhoods. Because there's this dynamic of you're already an engaged buyer.
You already have a relationship with this local seller. This is probably already part of your routine. You get lunch there every couple weeks, or you get your coffee every morning or every week, and it's like this easy, de facto default way to start that commerce journey. I do think that Neighborhoods is playing a bigger role in terms of how we're thinking about it. That's not to say that that's the end-all be-all. I still think we have some opportunities on the advertising side in terms of how we think about single-use payments, the connection between buy now, pay later for a value prop, and how we think about this concept of dynamic checkout and just surfacing the best way for a given customer to check out from within Cash App. I think we still have room to continue pushing there.
Probably the two biggest changes to the question is just out-of-network, massive opportunity, Neighborhoods, massive opportunity.
Yeah. All right. Last, connecting the Block question, getting it to transfer the Neighborhoods. As Block connects Cash App, Square, Bitkey and Bitcoin more deeply, what do you think is the biggest unlock for consumer adoption? On the retail side, how will Cash App compete with credit card rewards and consumer habits?
If I understand, I'm presuming this is talking about Bitcoin, like consumer Bitcoin adoption?
Yeah, I think.
Like Bitcoin.
between Cash App, Bitcoin, and Square, among all the other things that we're doing.
Well, first I would just ground this in our Master Plan. Master Plan that we rolled out on Investor Day is build the smartest app to run your business, build the smartest app to run your financial life on the consumer side, then connect Neighborhoods together globally with both apps, and then reduce ours and our customers' dependency on the legacy financial system. I think this question is getting at the latter, and I think it is absolutely critical. I have a few thoughts for how we do this. One is, in terms of Bitcoin as a payment rail or choose any payment rail. On us transactions, ledger transactions, whatever. I actually think that the folks who are incredibly Bitcoin pilled, I think they understand this. They are excited about this. We are seeing a bunch of usage on the buyer side, on the seller side. It is great.
It's not necessarily the entire U.S. TAM. I do think that to some extent, we can make the rail disappear, and I think for some customers, both consumers and buyers, that's a pretty attractive thing, and that's how you can get into a place where you're seeing a ton of transactions, a ton of volume happening on the Bitcoin Network or whatever kind of payment network we want to build. I think that the second part is just being able to connect all of the different ways to pay that we have. I think we have a really unique asset with Afterpay, Cash App Pay, Neighborhoods, and then obviously the Square side.
Conceivably, you could kind of envision a world where, when you're kicking off a transaction from a buyer's perspective, we're able to route that on a Block payment network or ledger or a traditional network or what have you. From a competition perspective and competing with credit card rewards and consumer habits, I think on the consumer habit side, I think that's really why not leading with the rail probably matters so much. What buyers want is just the most seamless experience. Whatever the easiest thing is, I want to be able to tap a button or tap a couple buttons, and then I complete the transaction. I feel pretty good there. From a rewards and incentives perspective, I think we have a lot of economics that we can work with, and we can choose where we want to monetize.
Even if you just think about Neighborhoods as a microcosm of what this could turn into, because we're acquiring new customers and increasing retention and so on and so forth, we have economics where we can, let's say, lower processing fees for sellers, or we can provide rewards and discounts to buyers. I think that there's a lot that we can push on there to the extent that we kind of grow both sides of the network and then increasingly have an ability to route however we see fit.
Yeah. Sounds exciting. There's a lot going on there underneath the surface. All right, let's switch gears and talk about AI. A lot of questions on MoneyBot and ManagerBot and just everything that's happening there, which we'll get to in a second. There's one question, though, on more like the operating model and how Block looks different today versus six or so months ago with becoming a far more AI-native company. The question is, what gives you confidence that Block's AI-native model isn't creating hidden operating debt? Talk about what's happened to support, what's happened to contact rates, severe incidents or SEVs, as we call them, product launch velocity, just the general operating cadence with AI now at the center of everything we're doing.
I think it's like we measure it. It's instrumented, and we can see what's happening, and we have weekly check-ins with Jack, where we're looking at all these dashboards, and we're discussing everything that's happening. I think everything looks incredibly positive. We mentioned support. On the support side, 70% of inquiries are being fully automated and resolved with AI, and that's across chat and voice and across brands as well. I think Cash App messaging, which is our highest throughput, highest volume channel, I think we're at an 80% automation rate. From a SEV perspective or, yeah, severe incident, like an outage or whatever, things look better than they did six months ago, better than they did one year ago.
I think that's where you get into this interesting thing, where with AI, you can increase velocity, of course, and a lot of folks are talking about that, but you can also increase quality at the same time. That's what we're seeing from a development perspective is quality and velocity are both up. We gave some metrics on PR throughput per engineer, pull requests, basically how much code we're shipping. That's up. Mean time to change is down. Reliability and stability are better. From a confidence perspective, it's really just like, do you have the telemetry? Do you have the measurement to understand what's happening? To the extent that there's an issue somewhere, there's a backlog somewhere, let's react.
Immediately following the org changes in February, what we saw was we had a backlog on the code review side, where we had a lot of code being produced relative to engineering leads and engineering folks to review that code. We had a two-week sprint, we were able to automate a lot of that with Builder Bot and work through it kind of move on to the next one. I feel really confident just in the deep visibility that we have across all of our operational programs, also what's happening on the development side.
Yeah. I think it's funny. There used to be a tension, right, between velocity and quality and between a lot of other things where it's like you had to choose between one or the other. I do think it's just fundamentally different today than it was even six or 12 months ago, that it can be velocity and quality get better as opposed to one trade-off against the other, which is pretty exciting.
I think. No, sorry. You go.
A little lag there. All right. Product side, let's start with MoneyBot. MoneyBot represents a big step toward making Cash App a truly proactive financial companion. Looking ahead over the next five years, how do you envision MoneyBot evolving in terms of capabilities, personalization, integration with other parts of the Block ecosystem?
I would bring this back to just our kind of overall framework for how we're thinking about development at Block, which is there's kind of four key pieces that we're building towards right now. The capability side, which is: what can we actually do? Moving money, issuing cards, custodying Bitcoin, et cetera. We have the interface, which is how are customers experiencing these capabilities? Right now, it's Cash App and MoneyBot, it's Square and ManagerBot, the Afterpay app, et cetera. This layer of proactive intelligence and our proactive intelligence models, which are kind of feeding into MoneyBot and ManagerBot. It's the world models that are governing a lot of what we do, that we're building the customer world models, as well as the company world model.
I think MoneyBot and ManagerBot are really just a first glimpse into how things might look in the future, and I think that there's a few key differentiators. Probably the first one is just composing the interface and composing capabilities in real time. I think that you can kind of start to see this with ManagerBot and MoneyBot, but what I say is today is the worst that ManagerBot and MoneyBot will ever be. We're really leading the way here. We're on the tip of the spear. You can start to understand how I don't think of MoneyBot as the current experience on Cash App.
I think about it as a concept, which is this like protector that's built on our deep understanding of you and our proactive intelligence layer that's able to compose UI in real time for you. Based on a deep understanding of my financial needs, I might get kind of like proactive prompts and interface related to cash flow smoothing because I'm in between paychecks. You might get something related to stock investing or Bitcoin investing because of how you're using the product and our deep understanding of who you are. From that perspective, I see MoneyBot and ManagerBot eating more of the traditional UI. We've been in this paradigm since we started developing apps where everything is tops-down managed and everything is drawn in a pixel-perfect way, and everything that we ship is in like a Figma file.
Then we go and build those UI elements, and we ship that in the binary of the app. That is fundamentally changing. For the first time with MoneyBot and ManagerBot, customers are experiencing UI. They're experiencing an interface that's not actually built into the binary of the app, and I think that's incredible. I think folks on our design and engineering team are pushing the ball forward here in an incredible way in terms of Generative UI and how that can help a customer.
Probably the connectedness to the business side, since this is kind of an investor call, is I spent a while leading growth on the Square side, leading growth on the Cash App side. There's always this tension where you have your kind of propensity models, and your next best action models, and you have certain ways in which you can kind of communicate with a customer, whether it's email or push notification or SMS or an app message or what have you. There's this tension between what feels like a great experience and a great product relative to what feels like marketing.
I think we're blurring the lines here, and MoneyBot and ManagerBot are going to be some of the most incredible ways possible to drive engagement, cross-sell, up-sell, but kind of doing it in a very authentic way because we just have such a deep understanding of what you're dealing with now, who you are, and what's coming down the pike. It's been really cool to see this in the early days with MoneyBot, where one of the top kind of proactive prompts that we have is like, "Hey, do you want to set up a savings goal and move money into that savings goal?
Because we kind of foresee some transaction coming down the pike for you." In some ways you can think of that as we're acting as a protector and working with our customers to support them and help them navigate their participation in the U.S. economy, which is great. In addition, we're seeing this is driving net new attach to other products and other features that we have that are incredibly valuable. I think discovery is a key part here.
If you can imagine a world where more and more of the UI is generated on the fly based on our deep understanding of who you are, and we're able to connect you with the things that we offer, the capabilities we offer that are the most valuable to you, that's a complete paradigm shift from the Cash App or Square or Dashboard six or 12 months ago, which are just static, top-down managed pixels that everyone has to go through in the same way regardless of who you are, your circumstances, how you've been using the apps.
I think there's a lot too underneath the surface where the customer obviously cares about everything you're talking about. What I'm really impressed by also is just some of the engineering feats, like all of this Manager Bot, Money Bot being built on open source technology and LLMs. A lot of the proactive intelligence features are probably not even being built on LLMs entirely. I think it's pretty incredible some of the stuff that the engineering org and everyone else at the company is doing around this. Like bringing some of the stuff from risk that we've innovated on, bringing that much further in other parts of the business. It's really exciting.
Just conscious of time, I think we could talk a lot about ManagerBot too, but I do think a lot of what you've referenced for MoneyBot is probably somewhat relevant for ManagerBot or somewhat applicable. Maybe one question that is for both, but I think it's probably more relevant for Square today, but any roadmap for agentic commerce in Square or Cash App?
I guess what I would say is I think we're incredibly well set up. I think right now there's a ton of hype around agentic commerce. If you're on Twitter, it's like there's a lot of protocols, there's a lot of white papers. It's a big buzzword right now. I think the ratio of hype to volume is one of the highest that I've seen for these sorts of concepts. I do expect that over time we're going to see, I don't even want to say agentic commerce, but we're going to see agents buying stuff on behalf of their humans, and I could see that getting pretty big. I think we're really well set up for that. A lot of what I've seen on that agentic commerce side, quote unquote, is like permissioned virtual cards.
It's like, here's this whole agentic commerce thing, but it's just permissioned virtual cards. I don't think that would be a net positive for humanity if all that agentic commerce ends up being is permissioned virtual cards. When I think about our capability set and what we could build, and actually built a prototype of this myself a few months ago, we have the ability to move money on and off on debit rails and credit rails. We have wires, we have checks, we have Bitcoin, we have stablecoins. We actually just GA'd stablecoins a couple of hours ago, so kudos to the team. We have I think the best stablecoin experience that I've seen within Cash App.
You can think about those as wallets and permissioned wallets that you could make available to agents. I think the managed accounts concept and the teams concept that we already have is highly applicable. You can basically think of like, oh, there's an account with a wallet that can do a whole bunch of stuff and make a whole bunch of transactions, and you want to put like guardrails in place. We're incredibly well set up for that. I think it's early. I'm not talking to customers on a regular basis who are like, "I really want my agents to be able to use this on the consumer side." I think that's more of like a kind of like small vocal minority Silicon Valley thing right now. I'm excited to explore it in the coming months and quarters.
On the Square side, I actually think there is a massive need, and we are building toward this right now, which is if you're a seller, I think that what you have to do all the time is pay your vendors, and then there's all of this automation that can take place in terms of like, "What's my inventory? What's happening with my sales? How are my numbers changing? Can you go and automatically reorder this thing for me, and I'll give you a certain set of guardrails," and what have you. I could see ManagerBot really being like an early mover here, and I do think that that's a real use case right now, just like automated Bill Pay, automated transactions with your vendors, and I think we're in a unique spot to solve that problem.
That makes sense. I thought it was funny that the stablecoins work dropped literally an hour before this. Shout out to Miles and team, the man, the myth, the legend.
Yeah, we didn't orchestrate that.
For sure.
It worked well.
Yeah. All right. Maybe shifting gears to Square, and with the Cash App as well for a couple questions. I think on the Square side, this question touches on a little bit of some of the things we were talking about earlier, but many Square checkout flows default to card or Apple Pay. When we look at what we have, like Cash App Pay, Bitcoin payments, are obviously infrastructure and capabilities that we have that aren't always accessible. How do you envision the payment experience evolving for both merchants and customers to incorporate Cash App Pay and Bitcoin potentially as default options?
A core principle for us has always been we want to allow sellers to accept whatever comes across the table. Like the kind of founding moment for Square back in the day was a given seller wasn't able to make a transaction because they didn't accept credit cards, and that led Jack and Jim and team down the path of building the Square Reader. I'm a little bit wary of like kind of heavy-handed steering and saying like, "Hey, we want to route all of these payments in this certain way and create friction in certain places." I think that we want to allow sellers to accept whatever buyers want to pay with.
We have the same answer on the stablecoin side for Square sellers, which is like to the extent a seller is going to miss a sale because they're not accepting stablecoins, like we'll support it. We don't think it's money 2.0. We don't think it's as good as Bitcoin from a principled perspective, but we really want to help sellers make every sale that they have the opportunity to make. That said, I think like to the question, there is power in defaults, and I do think that it will ultimately come down to simplicity. It will be incredibly complex on the back end and kind of like underneath the hood, like think of like the duck on water sort of thing.
If we can create the easiest, simplest, most accessible way to pay, whether it's a button on a website or in an app, or whether it's at the point of sale, and whether it's on Square Register with a buyer-facing display or it's not, then I think that we have way more flexibility in terms of bringing traffic onto Cash App Pay, bringing traffic onto Bitcoin, just like on us transactions. That can be useful because any sort of like unit economic savings that we have, we can plow back into either like reducing costs for sellers or rewards for buyers. It's a delicate and nuanced thing to manage. We're going to be super deliberate in terms of how we approach it.
A bounce between Square and Cash App here. On the Cash App side, changing gears entirely, the past two years, lending has been the strongest driver of growth for our product suite, and the lending product suite generally has expanded a lot. How do we decide when we're offering a loan? Like how do we determine whether that's helping someone versus preying on someone who might not have another option?
Great question. One, I think like we're incredibly principled. I think we over-index on transparency, we over-index on simplicity and just making sure our customers understand the products that they're using. I think probably the most helpful way that I would talk about this is really to just talk about the backdrop of what's happening in the U.S. economy. 50 to 80 million adults in the U.S. are being left out of the traditional credit system, either because they're credit invisible, so this happens a lot with younger folks who are thin file, where like they're just completely invisible to the credit bureaus, or because they're credit unscorable. They're left with just a set of like pretty terrible options when it comes to credit, and I think credit for these folks has been fundamentally mispriced.
That's what leads to the sort of thing where you have a payday lender that is charging 1000%-plus APRs. I think the other part of the consumer credit industry in the U.S. is that it's all revolving, and like the whole business model around like the traditional consumer credit card is like the credit card company makes more money-if a given customer gets stuck in a revolving debt spiral and has to continuously pay that interest on top. We've taken a fundamentally different approach, which is like, one, we have really unique data on our customers, and we're able to use that to underwrite our customers and price that credit in a way that's way more affordable than the other options. We're expanding access. I think, two is that our products are not revolving.
On the consumer side, if you take out a Borrow loan and you don't pay it back, then you can't take out another Borrow loan. Our incentives are aligned with customers relative to, let's say, your traditional credit card, where actually from an economic and business perspective, the credit card company is incented to get you stuck in that debt spiral. I think 3, I think we're proving it in our actions. We're in the process of rolling out Cash App Score that's going to be really helpful within the walls of Cash App and clearly defining the path for, if you use Cash App in this way, then you'll be able to get this sort of credit. We're starting to scratch the surface of what could this look like if we expose the Cash App Score outside of our walls.
Right now, I'm not thinking that Cash App should get into the mortgage lending business anytime soon, but there's no reason that we can't leverage the Cash App credit score to help our customers get access to credit in a way that's priced fairly. I think we just have a fundamentally different perspective than the legacy players. I don't think the legacy credit system is serving consumers in the U.S. very well. I think that's why you've seen the tailwinds behind buy now, pay later in general is because of these dynamics. We're going to continue to operate in this way. We're going to continue to over-index on transparency and simplicity and serve the close to 100 million Americans who are getting screwed over by the legacy financial system.
I'm incredibly excited by Cash App Score and just the ability to externalize some of the credit infrastructure that we've used to build all of our products on a first-party basis and deliver more value to customers via other partners and other products outside of our four walls and deliver value to us and our shareholders, too. I think it's, to your point, incentives really well aligned there, and I think it's going to be incredible.
When people think of our credit portfolio and talk about how much incremental growth is coming from lending, what have you, it's also the first product that we're offering where it's part of our credit and lending portfolio overall. Obviously, the way it hits the P&L and the way we monetize is totally different. It's like all of a sudden you can have a high margin product that's built on top of your ability to underwrite, which I think.
Yeah
is really important to think about.
Definitely. All right, we have about 15 minutes left. I'm going to do a couple of rapid-fire ones related to Square and Cash App, and then we have some questions that came in on international expansion and Bitcoin. On Square, if we were to fast-forward three years, what do you think people will be surprised the most about as it relates to Square from a product perspective?
Does rapid fire mean like, "Oh, and stop giving such long-winded answers?
A couple sentences work too.
Yeah. I think I'll say money out. Square is known for money in, payment acceptance. I think everything that we're building on the banking side with the credit card, with Bill Pay, with agentic commerce, there's so much more we can do with money out and massive runway there.
On Cash App, we have $59 million monthly actives as of our most recently reported results. What's the path to getting to $100 million?
Okay, I'll be short. One, I think fundamentally it comes down to just building awesome things. That's why I keep banging the drum, high quality, high velocity. The more stuff we build, the more new customers we'll attract, the more we can compress annual and quarterly actives into monthly actives, weekly actives, daily actives. I think, in the immediate term, there's a bunch of tailwinds for us from managed accounts to teens and families, to peer-to-peer changes, Neighborhoods, et cetera. I think to get to 100 million, I think there's two things that you would think about. One is, to what extent are you attracting those non-core demos from neighborhoods into Cash App and then building products and features for those customers that they love? Then second is, to what extent are you thinking outside of the United States?
Those are the key ways that I think about growing a network.
That's a good segue to international. Before we get there, Jack was on stage last week in Boston. We were both there. He mentioned Cash App hardware, a lot of speculation and excitement. Anything you want to say about that?
Well, he mentioned that there was going to be a hardware thing on the Cash App side and a hardware thing on the Square side.
Yeah.
I wish that I could go into it. All that I will say is that the Templeton Touch is alive and well. Thomas is one of the best hardware engineers in the world, and I'm really excited about what we have in store this year.
The Templeton Touch remains undefeated.
Undefeated.
On international, two questions here, first of all, I'm asking together because they're somewhat related. What's holding up international expansion? This person's asked, "I personally would love Cash App in Australia connected in with Neighborhoods." Tangentially related, what are the plans, targets, and timelines for quote, "global domination?
Okay. I like the verbatim question. Okay. The basic way that I think about international expansion is just diffing the opportunity cost between building something for a geography where you already exist relative to going into a new geography. Like a couple of years ago on the Cash App side, we really chose to focus on two opportunities that we had. One was the opportunity to meaningfully increase banking attach, Cash App Card, direct deposit, and our credit products. Then two, to meaningfully focus on teens and families. In retrospect, I think that was the right decision for the business, and like we're, I don't even know, we're, I don't know, 2x bigger than we were back then or something like that. That's not always going to be the case. So I do think that it makes sense to start thinking about international to some extent.
The other part of international expansion, both on the Cash App side, on the Square side, has been like just the fragmentation that exists. There's regulatory fragmentation, there's payment network fragmentation, there's also like, at least historically, there's big operational burden. Like spinning up a new country for Square and Cash App to operate in, it's people intensive, operationally intensive. I will say, I think things have evolved pretty meaningfully over the past few years, I'm excited to like question some of those preconceived notions. I think the thing for me would be like, what's the wedge that you want to lead with on the consumer side? It might not be peer-to-peer. Maybe it's buy now, pay later, maybe it's credit, maybe it's Neighborhoods. There's a lot of things where you're seeing demand across geographies, I think that's pretty interesting.
I also think that like to the extent a company were to build incredible experiences on Bitcoin or on stablecoins, I think Block is probably one of the most well-positioned companies in the world to do that. That's a little bit of color for like why we haven't massively focused on international the past few years and then like how I would think about the opportunity going forward.
I'll just add two things. I think the focus on Cash App from an international expansion perspective makes sense. It is worth noting that the Square business has been international for several years, and we've done quite well there and continue to perform incredibly well with scaling distribution and really unique product in a number of different countries. There's new distribution and international expansion motions that we're piloting across Square, which is pretty exciting. You said this before too, but we talked a lot about Block, about just changing the world's relationship with money or the global relationship with money, and that doesn't mean like you can't do that if you're just a U.S.-focused entity.
Yeah. It doesn't make sense as a mission if you're not going to go international.
Maybe on Bitcoin, a couple of questions here that are Proto-centric. One is just about, kind of I'll lump them together here, but is it fair to say that Proto hasn't been the success that you envisioned a couple of years ago? Do we see a viable path to Rule 40 for Proto or, and also niche products like BitKey?
On the Proto side, Proto has delivered above internal estimates since inception, so still really excited about Proto. There definitely has been a shift over the past, call it 6 to 12 months, where some of like the mega kind of public miners who potentially were in like addressable TAM have shifted some of their focus away from Bitcoin mining and onto like AI chips and what have you. There's still like a tremendous demand out there for great hardware and great software related to mining, especially like kind of if you exclude like two or three of like top names where you might have seen the headlines of like, "Oh, yeah, we're going to shift into the AI space." We have a great pipeline that I'm really excited about. I'm really confident in our ability to execute this year.
I think Proto's going to be an incredible business and an incredible part of the Block ecosystem. On the Bitkey side, I see Bitkey as just like part of our consumer Bitcoin business line overall. When I think about that, like from the exchange to custody, to payments, and what that allows us to do, I think that's also a phenomenal business, like one of the best businesses and business lines that we have at Block. I'm super excited about how Bitkey fits in, and then also Proto in its own right.
Yeah. I mean, all kidding aside on the Templeton touch, I think our hardware in Proto is pretty exceptional and it only gets better over time. One of the things that I personally didn't appreciate as much before, like diving into Proto and Proto becoming more of a gross profit contributor in the last couple of quarters, is just how much of the market for mining just sits outside of these big public names, to your point, that have put out a lot of press releases and talk a lot publicly. There's a lot of companies that just want to like operate their businesses and have less like public visibility. I don't think the lack of press releases or lack of talking externally is any indication on like the pipeline and quality of stuff that we're seeing there.
Yep.
All right. Maybe a closing question in the last couple of minutes, and then see if there's anything that you think we should've talked about. Last question I had was, what are you most excited about right now? Something that could truly surprise the market.
There's so much that I'm excited about. Okay, things that I'm super excited about that we've also talked about publicly that I can share. Maybe three things, and we've touched on them, but just to maybe highlight them. I think one is just the bots. I think we are like fundamentally leading the way here in terms of how we're thinking about ManagerBot and MoneyBot and how we're thinking about like the evolution of software applications, Generative UI, what we can do for our customers. I feel incredibly well-positioned for the quarters and years ahead. I also expect foundational models to continue to get better, other types of models, not LLMs, to continue to get better and for us to be uniquely well-positioned to capitalize on that. I think we haven't even talked about monetization.
If you think about ManagerBot and how much time ManagerBot can save a given seller, it's like bringing on a new employee or multiple new employees. How do you price that? How do you think about monetization? How do you roll that into pricing and packaging? That's on the first order, let alone engagement, cross-sell, upsell. I think that could be a big surprise. I think Neighborhoods, I still feel like there's skepticism on Neighborhoods, and I get it. I think we have a track record of taking the time to build a product really well and make sure that it's going to work in the way that we want. I remember years ago, all the investor conversations were around Cash App Borrow and like, Are you really going to be able to do this? Is it going to have market fit? Can you manage losses?
Why are you not using traditional credit scores?" On and so forth. Now, you look at the ramp of that thing. I think we have a strong eye toward building these sort of network-based products and what that can do in kind of a nonlinear way. I couldn't be more excited about Neighborhoods. Last, I won't spend too much time on it because you talked about it, Credit Score. Credit Score is just such an incredible superpower. Fun fact, when we initially rolled out Cash App Borrow, just to err on the safe side, we said, "Okay, let's use credit score data," like traditional credit score data from, whatever, FICO, Vantage, Experian, yada, yada, and it made our underwriting outcomes worse.
I am very confident that the Cash App Credit Score is so additive to tens and tens of millions of customers, and I understand the demand out there for this data, and I don't think No one else is in this position because Cash App is such a unique entity where it's not like a peer-to-peer network. It's not like an investing platform or a crypto platform or whatever. We have millions of customers using us as their primary financial account. We have such a rich ecosystem with so much engagement that provides a tremendous amount of data that we're able to use in our credit score. Obviously first order, like putting it into the app is going to be great, but then expanding beyond is just a massive opportunity. Those are my three picks.
Yeah. That makes sense. I think that's a great spot to leave it. Owen, thank you for doing this. This was a fun conversation. For everyone who are listening, thank you for joining, and thank you for anyone who watches the replay. We'll see you all again soon.
Appreciate it. Thanks, Matt. Cheers.