Block is rolling out a new rewards feature for its Cash App, and analysts at RBC Capital Markets see potential for the program to re-engage users and deepen ties with Square merchants. The feature, called “Local Cash,” is designed to reward customers for spending at participating Square sellers, creating a loop that could benefit both sides of Block’s ecosystem.
RBC, a global investment bank, notes that Local Cash is “interoperable,” meaning users can earn and redeem rewards across any participating Square merchant. That makes it more like a network-wide cash-back program than a single-store punch card. For everyday users, that means a reward earned at one local coffee shop could be spent at a nearby bookstore or salon that also uses Square—a convenience that could make the program stickier.
How Local Cash fits into Block’s strategy
Block operates two main businesses: Cash App, the peer-to-peer payments app, and Square, which provides payment processing and other tools for small businesses. The two have historically operated somewhat separately, but Local Cash appears designed to bridge them. By steering Cash App customers toward Square merchants, Block hopes to increase traffic for sellers, which could improve merchant retention and open the door to selling them additional services.
For merchants, the appeal is clear: more foot traffic and repeat customers. For Cash App users, the rewards offer a reason to open the app more often and choose Square-accepting businesses over competitors. RBC believes this could lift active user numbers and seller engagement, but the payoff may not be immediate.
Rewards programs of this kind typically take time to build habits. RBC expects a slower return than typical Cash App marketing, with a gradual growth curve stretching into 2027 and 2028. That means investors should not expect a quick spike in engagement metrics; instead, the benefits are likely to compound over time as more users and merchants join the network.
The cost of staying competitive
The biggest swing factor, according to RBC, is pricing. To keep users engaged, the reward rate on Local Cash will need to stay competitive with credit cards and other rewards offers. The market for rewards is crowded and numbers-driven, with consumers accustomed to earning 1% to 5% cash back on purchases. If Block’s rewards are too stingy, users may ignore the program; if they are too generous, the cost could eat into profits.
That tension is central to Block’s story. Stronger engagement is great, but richer rewards can quickly become a profit drag. If Block has to keep sweetening Local Cash to hold attention, the incentive bill rises with every transaction. The interoperable design only works financially if it drives enough extra spending and repeat visits across Square merchants to offset those costs over time.
RBC’s $95 price target on Block hinges on whether Local Cash can pay for itself. That suggests the market will be watching the program’s economics closely, not just its adoption numbers.
What it means for investors
For everyday investors, Local Cash is a bet on Block’s ability to turn its two-sided network into a competitive advantage. If the program succeeds, it could boost user engagement, merchant loyalty, and ultimately revenue. But the costs of running a rewards program are real, and they will show up in Block’s financials.
Investors should expect to hear more about Local Cash in upcoming earnings calls, with management likely to highlight user growth and merchant participation. The key metric to watch will be whether the program generates enough incremental spending to justify its cost. As with any rewards initiative, the early days may be expensive, and the payoff may take years.
Block’s broader strategy has been to build an ecosystem where consumers and businesses interact seamlessly. Local Cash is a step in that direction, but it is also a test of whether rewards can be a profitable growth engine rather than a money-losing gimmick. For now, RBC’s cautious optimism suggests the market is treating this as a multi-year experiment.
For context, other tech companies have used similar loyalty plays to deepen engagement. Budgeting apps often use rewards to encourage saving, and companies like SpaceX have leveraged network effects to grow revenue. But rewards programs are not a guaranteed win; they require careful balancing of incentives and costs.
As Local Cash rolls out, investors will be watching to see if Block can execute on its vision without sacrificing profitability. The next few quarters will provide early signals, but the full picture may not be clear until 2027 or 2028.
