On Thursday, March 13, 2025, Block, led by Jack Dorsey, announced a significant step forward in its financial services strategy: the Federal Deposit Insurance Corporation (FDIC) has granted approval for its banking subsidiary, Square Financial Services, to originate small-dollar consumer loans directly. This expansion of Cash App Borrow—a short-term lending product—eliminates reliance on external banking partners, enabling nationwide reach. Yet, with Block’s stock down over 30% in 2025 and recession fears mounting, this pivot into lending carries both promise and peril. Here’s how Block is navigating this high-stakes moment.
FDIC Approval Fuels Cash App Borrow’s Nationwide Rollout
The FDIC nod marks a turning point for Block, allowing Square Financial Services to offer Cash App Borrow directly to consumers across the U.S. Previously dependent on third-party banks, Block can now control the full lending process for its short-term loans, averaging under $100 with one-month terms. “Cash App Borrow is designed to provide short-term cash flow in a simple and accessible way when alternatives are notoriously expensive,” the company stated in a press release, positioning it as a cheaper alternative to payday loans or overdraft fees.
This move follows a robust 2024, where Cash App Borrow originated nearly $9 billion through external partners, maintaining loss rates below 3%. By bringing lending in-house, Block aims to capture more revenue and cut costs, a critical boost after last month’s lackluster earnings. Revenue grew just 4.5% year-over-year—missing Wall Street’s mark—triggering an 18% stock plunge, the worst since 2020. With transaction losses in its lending segment spiking 39% last quarter, however, the inherent risks of small-dollar lending loom large.
Recession Risks and Consumer Credit Concerns
Block’s lending push comes amid economic headwinds. President Trump’s expansive tariffs and government job cuts have stoked recession talk, reflected in March’s consumer sentiment drop to 57.9 (per University of Michigan data), below the expected 63.2. Small-dollar lending, while lucrative, is notoriously volatile in downturns, and Block’s rising transaction losses signal potential cracks. The company insists its underwriting model is “strong,” but analysts question its resilience if consumer defaults climb—a real threat as economic uncertainty deepens.
Beyond Lending: Afterpay and AI Ambitions
Block isn’t putting all its eggs in one basket. Around the same time as its earnings miss, it integrated Afterpay—acquired for $29 billion in 2022—into the Cash App card, adding a buy now, pay later (BNPL) option. CFO Amrita Ahuja told CNBC this enhances “credit options” and positions Cash App as a banking alternative, competing with Affirm and PayPal. With Afterpay’s global reach and BNPL’s projected $160 billion market by 2032, it’s a strategic hedge against lending risks.
This week, Block also unveiled a major AI investment, partnering with Nvidia to deploy Blackwell-chip-powered systems for open-source AI research. While specifics are vague—“exploring novel solutions for our customers,” per the release—it hints at AI-driven enhancements for Cash App, Square, or Afterpay, potentially in fraud detection or personalized lending. With growth stalling (stock down 33% year-to-date), AI could be Block’s long-term differentiator.
A High-Risk, High-Reward Strategy
Block’s 2025 playbook—expanding Cash App Borrow, scaling Afterpay, and betting on AI—aims to offset a 30%+ stock slide and 4.5% revenue growth. The FDIC approval unlocks nationwide lending scale, but recession fears and a 39% loss spike test its timing. Success hinges on execution: keeping loan losses low, leveraging Afterpay’s BNPL momentum, and turning AI into tangible wins. Failure could deepen investor skepticism after a bruising year.
As Dorsey steers Block through this pivot, the next few quarters—starting with April’s earnings—will reveal if this lending leap reignites growth or exposes vulnerabilities. With the Nasdaq shaky and consumer confidence wavering, Block’s bold moves are a calculated gamble in an uncertain world. Stay tuned for updates as this fintech saga unfolds.
