Block's Cash App Borrow feature is evolving from a convenient add-on into a serious profit center, according to a new analysis from UBS Securities. The lending product, which allows Cash App users to take out small, short-term loans, could boost the company's adjusted earnings per share by the mid-20% range in 2026 as it expands into more US states.
What Is Cash App Borrow?
Cash App Borrow is a lending feature within Block's popular peer-to-peer payment app. It lets eligible users borrow small amounts—typically between $20 and $200—with a flat fee and a set repayment date. The loans are designed to be a quick source of cash for users who might otherwise turn to payday lenders or overdraft services. For Block, the feature generates revenue through fees and interest, and it also encourages users to stay within the Cash App ecosystem.
The product has been rolling out gradually across the United States. As it reaches more users, the potential for loan volume and associated revenue grows. UBS estimates that this expansion could meaningfully lift Block's bottom line by 2026.
UBS's Bullish but Cautious View
In a research note, UBS analysts highlighted that Cash App Borrow could contribute mid-20% adjusted EPS growth in 2026. That is a significant boost for a company that has been working to improve profitability after years of heavy investment. The analysts see the lending feature as a high-margin revenue stream that can scale efficiently alongside the existing user base.
However, UBS also sounded a note of caution. The analysts warned that origination growth—the pace at which new loans are issued—may slow once the feature completes its US rollout and reaches a mature stage. In other words, the initial surge from expanding into new states could give way to a more steady, lower-growth phase. This is a common pattern for financial products that rely on geographic expansion for growth.
What It Means for Investors
For everyday investors, the UBS analysis suggests that Block's lending business could become a more important part of the company's earnings story. If Cash App Borrow delivers on its profit potential, it could help offset slower growth in other areas, such as the company's Square merchant services or Bitcoin trading revenue.
Investors should also be aware of the risks. Lending is inherently tied to credit quality. If economic conditions worsen, borrowers may struggle to repay, leading to higher charge-offs and lower profitability. Block has historically managed credit risk conservatively with small loan sizes, but a downturn could still impact results.
Additionally, regulatory scrutiny of fintech lending is increasing. Changes in rules around small-dollar loans or consumer protections could affect how Cash App Borrow operates. Block will need to navigate these potential headwinds as it scales the product.
The broader context is that many financial technology companies are leaning into lending as a way to boost revenue. For example, HDB Financial recently reported a 48% profit surge driven by consumer loans, highlighting the potential of this model. Similarly, traditional banks like M&T Bank saw Q2 profit rise as higher rates boosted lending spreads, showing that lending profitability can be sensitive to interest rate environments.
What to Watch Next
Investors will want to monitor Block's quarterly earnings reports for updates on Cash App Borrow's adoption and loan performance. Key metrics include the number of active borrowers, total loan origination volume, and charge-off rates. Any signs of slowing growth or rising defaults could weigh on the stock.
Also worth watching is the pace of the US rollout. If Block accelerates expansion into remaining states, the near-term growth could be stronger than UBS expects. Conversely, if regulatory hurdles or operational challenges slow the rollout, the profit boost may take longer to materialize.
For now, the UBS analysis provides a positive outlook for Block's lending business, but with a realistic acknowledgment that the easy growth from geographic expansion won't last forever. Investors should weigh the potential earnings boost against the risks inherent in consumer lending.
