Hip-Hop’s Role In Square’s $40 Billion Cash App Business Success

Cash App, your rapper’s favorite smartphone-based payments and money transfer service owned by Square SQ is now worth $40 billion. About 200 hip-hop artists name-check Cash App in their lyrics, according to music database Genius. Being culturally attuned paired with cryptocurrencies and stimulus checks all helped to create the country’s fourth largest consumer application in the U.S. 

The Breakdown You Need To Know:

Rappers have been using the fin-tech platform as a way to engage with fans for a while now. CultureBanx noted it’s easy to see how hip-hop influencers and their loyal followers grew Cash App’s monthly active users from seven million in 2017, to 30 million in 2020. In turn, these users also gained the attention of those in search of higher-end services like Bitcoin and general investing. 

First created back in 2013, Cash App’s valuation is almost two-thirds of Square’s current $65 billion market value. Since hitting a pandemic low in March, Cash App’s parent company has seen its share price nearly quadruple. Even with the 1.5% fee the company charges users to to transfer funds to a bank account.

Researchers at the Federal Reserve Bank of San Francisco found that cash was used in just 26% of consumers’ monthly payment transactions in 2018, down from 33% in 2015. Additionally, the volume of money Americans transfer to one another through mobile phones is expected to increase 26% in 2019 to $211 billion, according to research firm eMarketer.

Banking on Cash:

There are 63 million U.S. adults left behind by banks, and these are the customers Cash App is directly targeting through its once-a-week giveaway, called Cash App Friday, where it distributes cash digitally to some users who request it. During a time where 40% of Americans would struggle with a surprise $400 expense this has also helped increase it’s monthly active users. Trapital noted that in January of this year Cardi B and Megan Thee Stallion gave 2,000 random Tweeters $500 apiece for a total of $1 million via the app. In 2019, Cash App gave away $60,000 on its namesake Friday.

Giving away money may seem like a counterintuitive business strategy, but it’s perfect for Cash App. The company’s revenue comes primarily from subscriptions and services, not peer-to-peer transactions, meaning it still needs downloads. 

Bitcoin’s Cultural Come Up: Cryptocurrencies especially Bitcoin also played a major role in getting the company to a $40 market cap. It was back in  2017 when Cash App introduced the ability to trade Bitcoin, prior to the cryptocurrency’s peak valuation. Bitcoin accounts for about half of Cash App’s revenue, according to Coindesk. Excluding Bitcoin sales, the app’s revenue hit $325 million in Q2 of this year.

ARK research found that  PayPal’s PYPL Venmo has become the largest consumer finance application in the U.S with more than 52 million annual active users. Square’s Cash App ranks as number four, behind JP Morgan and Bank of America BAC . The company also noted that Square benefited from an influx of money (including stimulus checks) into the Cash App. Some investors are concerned that the one-time nature of the government stimulus makes Cash App’s current growth rate a little skeptical.