Block’s Cash App post-purchase BNPL is gaining steam, could lift EPS growth: UBS

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Block’s (NYSE:XYZ [https://seekingalpha.com/symbol/XYZ]) newest lending feature inside Cash App, the ability to convert recent Cash App Card purchases into installment plans, has scaled quickly since launching in February and could become a meaningful earnings tailwind over the next two years, according to UBS research analyst Timothy Chiodo.

“Pay over time for past purchases” (a post-purchase buy-now, pay-later option powered by Afterpay) is already outperforming Cash App Borrow at a similar stage of rollout, with better attach and loss rates, UBS said in an Oct. 10 report.

As adoption widens, the bank sees the product driving higher Cash App Card spend, growing the base of “primary banking” users, and boosting monetization.

FAST RAMP, STILL EARLY IN PENETRATION

* Origination scale: Post-purchase BNPL reached an annualized roughly $2 billion run-rate in July 2025.
* User count: More than 1 million users as of July, though the feature is available only to a subset of roughly 26 million Cash Card users and not yet in every U.S. state.
* Addressable audience: UBS points to roughly 8 million “banking active” Cash App users (paycheck deposit or more than $500 monthly Cash Card spend) as the most readily addressable cohort, representing about half of Cash Card spend (about $70 billion of an estimated $140 billion in 2025).
* Penetration today: UBS infers a mid-teens share of eligible Cash App Card volumes so far, with potential to climb toward the high-teens by 2028 as awareness improves, implying high-teens billions of post-purchase BNPL volumes on UBS’s 2028 view.

EARNINGS AND GROWTH CONTRIBUTION

UBS’s model (embedded in its broader Block framework) suggests post-purchase BNPL could add a mid-single- to high-single-digit (MSD–HSD) percentage to EPS growth in 2026 and 2027. At the Cash App segment level, the firm sees a MSD% contribution to reported gross profit growth in those years (1–2 points lower under scenarios with more Borrow cannibalization). On a total-company basis, UBS translates that to a low-single-digit gross profit growth contribution, similar whether measured on reported or adjusted gross profit that includes transaction, loan, and consumer receivable losses.

UNIT ECONOMICS AND RISK

* Monetization: Revenue comes from debit interchange (unregulated, about 1.6%) plus a flat consumer financing fee (standardized at 7.5%, though blended averages may run slightly lower due to state APR caps and a small pay-away to the current issuing partner, First Electronic Bank). UBS notes that, over time, Visa’s Flexible Credentials could allow the product to earn about 2%+ interchange, more akin to credit interchange.
* Costs & losses: Variable costs (funding “cash-in” via Visa Direct/ACH and the FEB pay-away, modeled at about 30 bps) are modest. Loss rates on the BNPL product are tracking slightly above roughly 3% today, around Borrow’s historical level, but UBS expects improvement as the underwriting model scales.
* Accounting timing: Because revenues are recognized over the life of the approximately six-week loan while losses are provisioned upfront, take rates can look temporarily lower during a rapid ramp.

AFTERPAY VS. AFFIRM: DIFFERENT ROUTES TO “PAY OVER TIME”

UBS contrasts Cash App’s strictly post-purchase approach (today) with Affirm’s card, which supports pre-purchase approvals in-app (eligible for credit interchange of about 2%+) and a post-purchase window as well. Affirm disclosed roughly 2.3 million active cardholders as of CQ2’25 and an approximately 80% interest-bearing GMV mix; Cash App’s BNPL is currently focused on Pay Now/Pay in 4.

VALUATION METHOD SHIFTS TO EPS MULTIPLE

UBS reiterates a $95 price target for Block as it rolls its valuation to 2027 and shifts to a ~21x P/E on Adjusted EPS (fully burdened for stock-based comp). That multiple sits modestly above Block’s one-year average NTM P/E of ~19x, which UBS says is warranted by improving growth durability in both the Square and Cash App ecosystems and potential estimate upside. The target also implies ~15x Adjusted EBIT on UBS’s prior framework.

As part of the methodology change (and adding a tax rate to outer-year estimates), UBS does not change fundamentals but updates EPS to $2.51 (2025) from $2.90, $3.50 (2026) from $4.50, and $4.56 (2027) from $5.82. UBS’s longer-term model points to ~28% EPS growth in 2028, implying a ~0.7x PEG on the new approach.

SQUARE MOMENTUM STILL A THEME

Beyond Cash App, UBS continues to see improving trends at Square, citing expanded field sales hiring and new distribution partnerships that could add about 200 bps to GPV growth in 2026 and about 400 basis points in 2027 from field sales alone (with further help from partners and lower churn). UBS also recently flagged Square’s simplified U.S. pricing tiers (Free/Plus/Premium) as a small net positive to gross profit over time.

WHAT TO WATCH

* Feature expansion & state coverage: Wider eligibility inside Cash App, potential migration of BNPL originations from FEB to Square Financial Services (removing the partner bank pay-away and potentially increasing pricing flexibility where APR caps allow).
* Penetration of “banking actives”: Greater direct-deposit adoption and higher monthly spend among the roughly 8 million most addressable users.
* Credit performance: Loss rates trending toward (or below) about 3% as underwriting history deepens.
* Interchange mix: Any shift toward credential types that qualify for higher interchange.
* Cannibalization vs. complementarity: How post-purchase BNPL interacts with Cash App Borrow volumes and profitability.

STREET CONTEXT

UBS will host an investor/industry panel on modern POS competition (Square, Toast, Clover, Shift4, SpotOn, TouchBistro, Genius, PAR, Shopify, and others) in San Francisco on Nov. 18, the evening before Block’s investor day.

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