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 deferred payment feature “Pay Over Time” that allows eligible users to pay for their daily transfers over an extended period of time.

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

To take advantage of the new feature, users pay a 7.5% fee — which means if you borrow $100 from Cash App, you’ll end up paying $107.50 to the company. The company says transfers of $25 or more are eligible, and payments can be made in weekly increments over a period of up to six weeks or as a single payment on the due date.

There are also loan limits in the new system, but they are dynamic – meaning they will be different for different users. “The specific amount available for transfer depends on the amount of the original transaction and the individual customer’s assessment,” a company spokesperson said. “We evaluate each transaction for eligibility based on our responsible lending standards rather than setting traditional credit limits,” they added.

In an interview, Owen Jennings, CEO and chief business officer at Block, framed the new feature as a way to add value for Cash App customers through “cash flow management.” Jennings noted that many Americans have different types of jobs today, many of which pay less consistent wages than those offered in previous decades. The new Cash App feature is designed to add financial flexibility to this situation, Jennings said.

“We’re seeing more people – especially young people – who are solopreneurs, entrepreneurs… [and] Gig workers. They have side hustles, they work multiple jobs, [and] “So they have variable sources of income,” Jennings said. “It’s very different than if you go back 40 or 50 years ago — I think the average income in the U.S. [back then] He was basically getting a steady W2 income every two weeks.

The popularity of “buy now, pay later” services has skyrocketed over the past several years, while also generating significant criticism and concern. Some critics assert that such services are designed to trap consumers into cycles of debt, while others point out that Americans’ need to finance basic household items is a sign of a broader economic crisis. The companies providing these services also found themselves in legal trouble. Just this week, Klarna was sued in a class-action lawsuit alleging it engaged in “predatory” practices, Bloomberg reported.

Jennings said Cash App’s new feature has powerful built-in protections designed to steer users away from financial trouble, such as falling into what he called a “debt spiral.” “The way all of our lending products are set up is non-revolving,” he added. “If you don’t repay the loan, you won’t be able to get another loan.”

The service also builds on other financial flexibility services that Cash App already offers, Jennings said. In previous years, the app debuted Borrow, which, somewhat like a traditional bank, allows users to take out a small loan from the app and then repay it 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 using the card.