Block’s banking unit, Square Financial Services (SFS), has obtained approval from the Federal Deposit Insurance Corp. (FDIC) to directly offer consumer loans through Cash App Borrow. This decision allows SFS to oversee the lending process without relying on an external bank partner. The move is expected to streamline operations and provide more control over loan services. With this shift, Block aims to expand its financial offerings while addressing underserved individuals who lack access to traditional credit options.
Block has previously relied on external banking partners to facilitate Cash App Borrow loans. However, the company has steadily expanded its in-house financial services, including Square Loans for businesses. The approval from the FDIC signifies a further step toward consolidating its financial operations under its own banking division. Cash App has already introduced features such as high-yield savings and investment-related services, reflecting a broader strategy to grow as a financial service provider.
How Will Cash App Borrow Loans Be Managed?
SFS will now handle the origination and servicing of Cash App Borrow loans nationwide. These loans are typically small, short-term amounts under $100, meant to be repaid within a month. Customers can manage their repayments directly through Cash App, integrating the borrowing experience within the existing digital platform. In 2024, Block’s external bank partner facilitated nearly $9 billion in Cash App Borrow originations, with loss rates remaining below 3%.
What Are Block’s Broader Banking Plans?
Block continues to expand into the banking sector, focusing on both consumer and business financial products. SFS will maintain its lending services through Square Loans and its business savings offerings via Square Savings. The company has emphasized its commitment to providing financial services to individuals who may not have access to traditional banks. Additionally, Cash App continues to introduce banking-related features such as paycheck allocation to investments and free tax filing.
“Across Block we’re focused on building technology to increase access to the economy, and Square Financial Services is a critical tool in helping us deliver on that,” said Amrita Ahuja, Block’s chief operating officer and chief financial officer. “The bank allows us to provide a clear path to cash flow using our proven underwriting mechanisms for businesses and now consumers who are not well served by the traditional banking and credit systems.”
Block executives previously discussed their strategy to increase traditional banking services during a February earnings call. They highlighted Cash App Borrow’s strong demand and the company’s dedication to developing its financial ecosystem. The goal is to position Cash App as a leading financial services provider for U.S. households with incomes up to $150,000 annually.
Shifting loan origination to SFS gives Block greater control over its financial products, reducing reliance on third-party institutions. This move is part of a larger trend where fintech companies seek to internalize financial services to improve efficiency and profitability. With the regulatory approval in place, Block can now oversee Cash App Borrow loans independently, aligning with its broader goal of embedding banking services into its ecosystem. The impact of this transition will depend on how effectively SFS manages loan operations and maintains risk levels in the coming months.
