Cash App, the peer-to-peer financial technology application owned by Block and co-founded by Jack Dorsey, has unveiled a new “pay-over-time” deferred payment feature. This innovative service enables eligible users to spread their payments for everyday P2P transfers over an extended period.
The trend toward offering deferred payment options for commonplace purchases has gained traction among various companies. For instance, approximately a year ago, DoorDash collaborated with Klarna to introduce a “micro-finance” model for food orders, an initiative that humorously sparked debates regarding “burrito debt” and late capitalism. Cash App’s new offering builds upon this movement, extending financial flexibility into the realm of peer-to-peer payments.
To make use of this new feature, users will incur a 7.5% fee; this means that borrowing $100 from Cash App will result in a repayment of $107.50. Transfers of $25 or more qualify for this deferred payment option, and repayments can either be made weekly over six weeks or as a lump sum at the payment's due date.
The system does have loan limits, which vary for each user. “The specific amount available for conversion depends on the original transaction amount and individual customer assessment,” explained a spokesperson. “We evaluate each transaction for eligibility based on our responsible lending criteria rather than adhering to traditional credit limits,” they continued.
In a recent discussion, Owen Jennings, Block’s Global Head of Business, articulated the feature's intent to enhance value for Cash App users by promoting “cash flow management.” Jennings pointed out that many Americans are now employed in positions that offer less consistent pay compared to previous generations. Cash App's new capability seeks to provide financial flexibility to users facing such challenges.
"We're observing an increase in individuals, especially younger entrepreneurs and gig workers, who diversify their income through multiple jobs and side hustles, resulting in variable income streams," Jennings noted. This evolving workforce dynamic stands in stark contrast to the steadier income opportunities common in past employment landscapes.
The popularity of “buy now, pay later” services has surged in recent years, alongside a growing wave of criticism. Opponents argue that these services may ensnare consumers in cycles of debt, while others believe that the necessity for financing basic household goods serves as an indicator of deeper economic issues. Notably, Klarna has recently faced a class-action lawsuit alleging “predatory practices” connected to these financial solutions.
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