Square adds teens to Cash App to strengthen relationships with parents

Square hopes to reach a younger audience by making its Cash App available to users between the ages of 13 and 17, enabling people in that age group to use peer-to-peer payments and a Visa debit card while keeping parents in control.

The addition of this age group will benefit the company in several ways, including expanding Square's broader financial services relationships with families and boosting overall engagement with Cash App and its accompanying payment card, CEO Jack Dorsey said on a conference call to discuss third-quarter earnings.

"This is an entirely new demographic for us," Dorsey said, adding Square is focused on making Cash App the front end for Square's growing range of financial services and e-commerce products. "Any parent can turn on the Cash App for kids, who can use peer-to-peer payment, direct deposit and the Cash Card."

Adding more users to Cash, and parental supervision, can potentially increase engagement with Cash as adults use the app to monitor their kids' activity or transfer funds to their kids. During the earnings call, Square reported Cash Card users use twice as many Square products as noncard users, and provide 70% more deposits. Square's Cash App has 40 million users who access the app monthly, with 66% accessing it weekly, Square reported, adding it's hoping to create daily usage of the app to boost higher lifetime value.

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For the quarter that ended Sept. 30, Square reported revenue of $3.84 billion, up 27% from $3.03 billion a year earlier. Revenue from Bitcoin trading totaled $1.82 billion, up 12% from $1.63 billion a year earlier. That's lower than FactSet analysts' projections, which were revenue of $4.39 billion and Bitcoin-related revenue of $2.56 billion.

The new age range enables Square to reach a wider potential audience than that of PayPal's Venmo, which requires users to be 18. The bank-supported Zelle also requires users to be 18.

But Square would still be several months behind Apple, which began allowing Apple Card users to add family members as young as 13 to their accounts back in May.

"By lowering the age barrier, we're expanding access to 20 million teens in the U.S. and giving them the tools to operate in the cashless economy," Dorsey said.

Customers younger than 18 will require a parent or guardian to authorize their accounts, and the teen version of Cash will not allow bitcoin trading at launch.

"It's important as [paper] cash becomes less relevant in a digital world," Dorsey said. "Parents can teach kids about finance with the appropriate protections in place."

Square in September introduced Cash App Pay, which allows consumers to pay with their Cash App account at checkout via a QR code or by using an on-screen button on their mobile device. Cash App Pay offers a service that reaches both merchants and consumers, a two-sided strategy the company hopes to expand upon by investing in product development for Cash App.

"Having the two audiences — sellers and individuals — is the way we differentiate," Dorsey said.

Square also reported it hopes to complete its Afterpay acquisition in the first quarter of 2022. Square in August struck a $29 billion deal to acquire Afterpay, one of only three BNPL firms that controls more than 10% of the U.S. market, behind Affirm and Square rival PayPal. Afterpay produces about 1 million leads a day to its enterprise merchants, according to Square, which said that will serve Square's long-term strategy of reaching larger sellers.

"That's the thesis behind Afterpay … it's a way to connect ecosystems," Dorsey said. "Any connection between ecosystems strengthens the value to merchants and individuals."

Dorsey did not address Bitcoin revenue falling short of analyst's projections during the earnings call, but reiterated Square's focus on Bitcoin. Square plans to release a white paper on Nov. 19 with details on TBD, the payment company's new unit for decentralized financial services and other Bitcoin-related products. Square is also developing a Bitcoin hardware wallet and Bitcoin mining services, according to Dorsey.