Cash App launches ‘pay later’ feature for P2P transfers

Cash App, the peer-to-peer fintech app owned by Jack Dorsey’s Block, has launched a new “pay-over-time” deferred payment feature that allows eligible users to pay for their everyday transfers over an extended period of time.

Companies have increasingly offered deferred payments for relatively mundane and everyday purchases. About a year ago, DoorDash partnered with Klarna — allowing users to “micro-finance” their food orders (the partnership notably inspired a flurry of online jokes about “burrito debt” and late capitalism). Cash App’s new feature clearly builds on this trend — expanding flexible financing into the P2P payment realm.

To take advantage of the new feature, users pay a 7.5% fee — meaning that, if you borrow $100 from Cash App, you’re going to end up paying the company back $107.50. Transfers of $25 or more are eligible, the company says, and repayments can be made in weekly increments over a period of up to six weeks or as a single payment at the due date.

There are also loan limits to the new system, but they are dynamic — meaning that they will be different for different users. “The specific amount available for conversion depends on the original transaction amount and individual customer assessment,” a spokesperson said. “We evaluate each transaction for eligibility based on our responsible lending criteria rather than setting traditional credit limits,” they added.

In an interview, Block’s Executive Officer and Head of Business, Owen Jennings, framed the new feature as a way to add value to Cash App’s customers via “cash flow management.” Jennings noted that many Americans have different kinds of jobs today — many of which pay with less consistency than those offered in prior decades. Cash App’s new feature is designed to add financial flexibility to that situation, Jennings said.

“We’re seeing more folks — particularly younger folks — who are solo-preneurs, entrepreneurs … [and] gig workers. They have side hustles, they’re working multiple jobs, [and] so they have variable income streams,” Jennings said. “It’s very different than if you go back like 40 or 50 years ago — I think the average income earner in the U.S. [back then] was basically getting, like a steady W2 income every two weeks.”

“Buy now, pay later” services have skyrocketed in popularity over the past several years while also spurring significant criticism and concern. Some critics maintain that such services are designed to trap consumers in cycles of debt, while others have suggested that Americans needing to finance basic household items is a sign of broader economic crisis. Companies that provide these services have also found themselves in legal hot water. Just this week, Klarna was sued in a class-action lawsuit alleging it had engaged in “predatory” practices, Bloomberg reports.

Jennings said Cash App’s new feature has strong built-in protections that are designed to steer users away from financial trouble, like getting stuck in what he called “debt spirals.” “The way all of our lending products are created is non-revolving,” he added. “If you don’t pay back a loan, then you can’t take out another loan.”

The service also builds off of other financial flexibility services that Cash App already offers, Jennings said. In prior years, the app debuted Borrow, which, somewhat like a traditional bank, allows users to take out a small loan from the app and then pay it back over a period of four to six weeks.

Another offering is Afterpay for Cash App Card (its debit program), which allows users to defer payments for transactions made with the card.