Square’s Cash app fueled its second quarter performance

• Square’s gross payment volume fell 15% per year in the second quarter due to the impacts of the coronavirus pandemic.
• Its Cash app has flourished and now boasts 30 million users, helping Square to continue to show revenue growth.

Square revealed that its peer-to-peer (P2P) payment platform had more than 30 million users in June, up from 24 million in December 2019, and reported second quarter 2020 revenue of $ 1.2 billion, up 361% year-on-year.

App Cash
Square’s booming performance helped Square’s total net revenue grow 64% year-on-year to $ 1.92 billion despite a 15% drop in its gross payments volume (GPV) in the quarter , with Square merchants facing hardships amid the coronavirus pandemic.

Stimulus payments from the US government may have contributed to the success of Cash App, but the platform may be able to maintain its growing user base as consumers deplete their stimulus funds.

• App Cash activated consumers to receive their US stimulus payments through Cash App accounts, likely bringing new users and more funds to its platform. Users who had Cash App’s free Cash Card could receive their stimulus funds directly into their account, which would likely help Cash Card reach 7 million users and Cash App attract new users. Volume per active customer in the Cash App ecosystem increased on a quarterly and annual basis in the second quarter, which Cash App said was in part due to government stimulus programs.
• Many new users of the platform have signed up with several of its services, which can help Cash App ensure that users don’t give up on its platform after spending their stimulus funds. Square reported that new users took advantage of more services – like the Cash card, direct deposits, and Bitcoin investing – in their first month. This means that new users are exposed to more Cash App offers and could make them more likely to become dependent on one or more of its services and serve as loyal users from whom Cash App can continue to earn income. And there might be more opportunities to expand its user base given Venmo and Zelle, two competing P2P payment platforms, also expanded their user base in the second quarter.

Square needs the Cash App to continue to thrive as its ecosystem of sellers was affected during the pandemic. Square’s seller GPV fell on an annual basis in Q2 2020 as its on-map GPV plunged 38% year-on-year. This measure likely fell because in-store businesses grapple with changes in consumer behavior and restrictions on operations caused by the pandemic.

This is extremely damaging for Square, as its sales business generates the bulk of its transaction-based revenue – it grossed $ 629 million compared to $ 54 million for Cash App this quarter. This makes the growing success of Cash App, which could also help increase Square’s historically leading subscription and services revenue segment, key to Square’s ability to grow during the crisis, although sales activity Square can rebound as soon as customer spending rises again because its vendor GPV managed to grow 5% year-on-year in July.

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