Cash App launches ‘pay later’ feature for P2P pay transfers

Cash App, the popular peer-to-peer payment platform owned by Block, led by Jack Dorsey, has unveiled an innovative 'pay-over-time' feature. This new option enables qualified users to spread out their payments for everyday transactions over an extended period, reflecting a growing trend in the fintech industry. Deferred payment options have increasingly become common for various minor purchases. For instance, DoorDash previously teamed up with Klarna to allow customers to finance their food deliveries, a collaboration that sparked a wave of humorous online commentary about 'burrito debt.' Cash App's latest feature seeks to expand this flexible financing approach into the realm of peer-to-peer payments. To utilize this new feature, users will incur a fee of 7.5%. For example, borrowing $100 from Cash App would result in a repayment of $107.50. Transfers of $25 or more are eligible for this option, and repayments can be made weekly over a maximum of six weeks or paid in full on the due date. The loan limits are variable, adapting to each user’s individual circumstances. A spokesperson explained, 'The specific amount available for conversion is based on the original transaction amount and customer evaluation, focusing on responsible lending criteria instead of traditional credit limits.' In a discussion about this new feature, Owen Jennings, Block’s Global Head of Business, highlighted the value it brings to users by assisting with cash flow management. With many Americans now working in less stable job environments compared to previous decades, Cash App's feature aims to provide much-needed financial flexibility. Jennings noted the rise of gig workers and entrepreneurs who often juggle multiple income sources, contrasting their situation with the steady paycheck model prevalent 40 to 50 years ago. The 'buy now, pay later' model has surged in popularity, but it has not been without controversy. Critics argue that these services can lead to cycles of debt for consumers, with some suggesting that the necessity for financing basic expenses points to broader economic issues. Recently, Klarna faced a class-action lawsuit alleging it engaged in predatory lending practices. Jennings assured that Cash App's new offering includes robust safeguards to prevent users from falling into debt traps. 'All our lending products are designed to be non-revolving,' he stated. 'If a loan isn’t repaid, users cannot take out another loan.' This service complements existing financial flexibility tools within Cash App, such as the Borrow feature, which allows users to take small loans with repayment terms of four to six weeks, and Afterpay for Cash App Card, which lets users defer payments on card transactions.