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Jack Dorsey's plan to reshape Square

After retaking day-to-day control as CEO of Square last fall, Jack Dorsey, who also heads Square's parent company, Block, surprised analysts with fourth-quarter profits that exceeded expectations, in part through aggressive cost-cutting. And he's just getting started.

Next, Dorsey aims to overhaul the 15-year-old Square app so that it works more cleanly with Block's booming peer-to-peer Cash App to act like a bank for sellers and others.

Block's goal is for Cash App to become one of the top providers of banking services to U.S. households earning up to $150,000 annually. The company will beef up the financial tools it offers, and make the P2P app the go-to banking source for Square sellers, Dorsey told analysts during a conference call to discuss earnings Thursday.

"We're going to start putting our Square customers first and foremost in the Cash App, and you'll really see the power of our combined ecosystems and a combined network," Dorsey said, noting that Cash App P2P features position the entity to operate as a "social bank."

Jack Dorsey
Block CEO Jack Dorsey vows to more closely integrate Square, Cash App and Afterpay so the entities operate like a "social bank." Credit: David Paul Morris/Bloomberg

The plan hinges on expanding features within Block's Cash App and the Cash App Card to close the distance between its own offerings and those of a bank. Block plans to add mobile check deposit, bill payment and wire transfers, Dorsey said in a shareholder's letter also released Thursday.

Cash App already offers a Visa debit card, two-days-early direct deposit, cash deposits, instant discounts on debit spending and an FDIC-insured savings account with no minimum balance and free overdraft insurance. Cash App also offers short-term credit through Borrow, as well as stocks and bitcoin services. Its banking services are supported by Sutton Bank and Lincoln Savings Bank.

As Block's consumer banking ambitions expand, so will scrutiny of the firm's payments security and regulatory compliance. Reports recently circulated that two whistleblowers have filed a complaint with the Financial Crimes Enforcement Network, the Securities and Exchange Commission and the Commodities Futures Trading Commission about Cash App's potential use by criminals for money laundering and terrorism financing.

Dorsey told analysts that Block is investing more deeply in security and compliance this year, adding that it means "continued focus on risk and fraud management, including protecting our customers from bad actors who attempt to abuse our platform through vectors like scams and phishing attacks," but he did not directly confirm any regulatory probes. Block did not respond to emailed inquiries about this topic.

Many of Dorsey's moves are aimed at shoring up internal operations that had frayed over the last decade when Dorsey wasn't directly managing the company, culminating in the sudden exit last year of Square's longtime CEO Alyssa Henry.

Robert Anderson, a Square founder, is rejoining the company "to focus on making design at Square world-class again," Dorsey said.


A top priority this year will be tightening the integration across Square sellers, Cash App and Afterpay, the company's buy now/pay later arm. Block immediately plans to eliminate "four or five" different versions of the Square app that previously targeted different user groups, creating a single app called Square, with tabs for users to access services targeting sole proprietors or restaurants, for example.

Block also plans to promote Afterpay within Cash App by displaying BNPL offers there, and also by inviting Afterpay app users to fund BNPL purchases with the Cash App Card, he said.

A sign on a food cart notifies customers they can pay using cash apps in Brooklyn, New York City, on Saturday, February 10, 2024. (AP Photo/Ted Shaffrey)
Cash App listed as a payment method on a food cart m New York. (AP Photo/Ted Shaffrey) (ASSOCIATED PRESS)

To boost growth at Square, the firm is trying out a new "pay as you go" model, offering some sellers free point-of-sale hardware in exchange for a higher card-processing rate. Square is also offering restaurants a bundle of business-management software tools at a discounted rate, and offering sellers new incentives for referrals.

Asked about the possibilities for expanding Square distribution through banks, Dorsey noted that years ago Square partnered with JPMorgan Chase to distribute Square readers through Chase's bank branches and "it wasn't that effective."

Noting that some banks are succeeding in distributing mobile payment acceptance tools through branches, Dorsey said he's still open to the idea, but it's secondary to the immediate need to modernize Square itself, including through the use of generative AI.

"[AI] is going to be extremely impactful for us as we look at everything that we're doing and all the tools that we're building and how much more productive it makes all of our engineers," Dorsey said. Additionally, AI "allows us to ship faster, allows us to correct mistakes much faster and really be ahead of the market," he said.

Block's gross profit for the fourth quarter was $2 billion, up 22% over the same period a year earlier. Cash App generated $1.2 billion, up 25% year over year. Square alone contributed $828 million to gross profit, up 18% year over year.

For the full year, Block's gross profit was $7.5 billion, up 25% over 2022.

Block raised its 2024 profit forecast by more than $200 million, and the company now expects to produce gross profit of $8.65 billion, which would be 15% above 2023.

The company has also cut staff through layoffs and attrition so employees number under 12,000, a level Dorsey plans to keep in place for the next several years, he said.

"We sense that work is underway to enhance growth by improving product velocity," said analysts at JPMorgan in a Thursday note to investors, adding: "The overall momentum of Cash App is impressive."