Cash App needs to drive users to use more features and improve its customer service in order to grow from peer-to-peer payments into a full-fledged banking service, Block Head Jack Dorsey said at a conference on Tuesday.

Oakland, California-based Block owns Cash App along with point-of-sale software Square and buy now, pay later service Afterpay. Block is seeking to make the app the primary bank for Cash App’s users, many of whom are younger and lower-income. To achieve that goal Block is focused on growing usage and volume of the P2P app’s direct deposit feature.

Currently, only two million of Cash App’s 57 million active users are using the app’s direct deposit feature to transfer some, or all, of their paycheck into the app, according to J.P. Morgan Managing Director Tien-Tsin Huang who spoke with Dorsey at the bank’s global technology, media and communications conference.

Dorsey said Block is focused on getting users who currently deposit a portion of the paycheck into Cash App to send the whole amount there. “Our goal is to continue to shift that share of direct deposit,” Dorsey said, adding that having users to try new features may lead them to put the full amount of their paycheck in the app. 

To compete with other institutions vying for the ability to hold consumer deposits, Dorsey said Cash App needs to outpace banks in how it treats its customers. “The customer service aspect of our business needs to feel like a product that again makes people say ‘wow!’ I don't think it does today,” Dorsey said.

A Block spokesperson pointed to the company’s shareholder letter from the fourth quarter of last year when asked about how the company would get Cash App users to use more features and how it planned to improve Cash App’s customer service. 

The letter listed features such as credit building and subscription management tools, along with traditional banking offerings like wire transfers and bill pay as ways it could entice Cash App users to bank with them. Block launched an internal generative AI tool in Q4 2023 aimed at helping its customer service team respond faster to questions, the letter said.

A report this month by investment firm TD Cowen said consumers were increasingly using Cash App for services beyond P2P payments, including for banking services, direct deposit and shopping. But the report also found that young consumers, a target audience for the app, value physical bank locations, which Cash App does not have. 

Block is also facing government scrutiny. The company’s compliance program, including at Cash App, is under investigation from the Department of Justice. It’s also facing whistleblower complaints of alleged fraudulent activity on Cash App that were filed with other federal agencies.

Additionally, the Consumer Financial Protection Bureau said it may take “legal action” related to customer service concerns connected to Cash App, according to a company disclosure in February.

Dorsey acknowledged the compliance concerns on Tuesday, saying the company was in a “phase” where it had to have many conversations with regulators. “We have to help educate regulatory bodies,” Dorsey said. “We have to help bring new technologies to bear and always be ten steps ahead of the adversaries that are always going to be there.”

By James Pothen on May 24, 2024
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