Block's New Strategy Aims to Cut Credit Card Fees and Boost Cash App Use

Block Inc., led by CEO Jack Dorsey, aims to increase merchant adoption of its payments network by incentivizing shoppers to pay directly with Cash App balances, sidestepping card networks' fees. The company is offering sellers a 1% payment-processing rate and subsidizing rewards for consumers through the new Neighborhoods program. This move targets credit-card behemoths Visa and Mastercard, with the goal of gaining an edge over point-of-sale competitors and boosting Cash App engagement.

Block Inc., under the leadership of CEO Jack Dorsey, has launched a new initiative to increase merchant adoption of its payments network. The company aims to incentivize shoppers to pay directly using Cash App balances, thereby sidestepping the high fees typically charged by credit card networks such as Visa and Mastercard. This move is part of Block's broader strategy to gain an edge over competitors in the point-of-sale (POS) market and boost engagement with its Cash App platform.

Block's new program, called Neighborhoods, offers sellers a 1% payment-processing rate for all orders placed through Cash App, a significant discount compared to the 3% fee charged by traditional card networks. Additionally, the company will subsidize a portion of the rewards offered to consumers, allowing local businesses to provide rewards programs without substantial investment.

The program is designed to help smaller merchants compete with larger chains by offering rewards similar to those provided by major retailers like Starbucks. Consumers can accumulate rewards by shopping at any merchant using Square terminals and access them through the Cash App.

The initiative is part of Block's effort to convert Cash App from a peer-to-peer payment app into a full-fledged banking platform. The company processed approximately $300 billion through Cash App in the past year, including peer-to-peer transactions that may have been transferred to external bank accounts. The Neighborhoods program is intended to increase the volume of payments processed through Square terminals and keep more money within Block's ecosystem.

Block has also been exploring the integration of Bitcoin as a payment method, allowing merchants to accept Bitcoin at checkout and convert a portion of their daily sales into the cryptocurrency. Dorsey has long been an advocate of Bitcoin's use in daily transactions and holds approximately 8,692 Bitcoin on Block's balance sheet.

While the Neighborhoods program offers significant advantages to merchants and consumers, its success will depend on convincing shoppers to change their entrenched ordering habits and ensuring a seamless user experience. Additionally, the program must be effectively integrated with the existing Cash App platform to maximize its benefits.

Block's latest move comes as the company continues to navigate the competitive landscape of the fintech industry. As it expands its offerings, Block must balance the need for innovation with the need to maintain a user-friendly and reliable platform.