Dive Brief:

• Block’s creation of a new credit-scoring system is an extension of the digital payments company’s long-term efforts to broaden access to financial services.
• People who use digital wallet Cash App and buy now, pay later services like Afterpay skew young and are less likely to have an extensive credit history. That’s why their parent company Block likely developed its own alternative credit score, according to one analyst.
• “I think what [Block has] found is that a lot of their customers tend to have thin credit files,” said Bank of America analyst Mihir Bhatia in a phone interview.

Dive Insight:

Oakland, California-based Block scores customers of services like Cash App and Afterpay based on their transaction histories, and decides whether or not to offer them services such as short-term loans, in the same way credit bureaus assign credit scores to consumers. The company announced last month that it started a pilot program that would disclose those scores to select customers.

About half of the consumers who used buy now, pay later services last year were under the age of 35, according to a December 2024 analysis from LexisNexis Risk Solutions. In contrast, roughly two thirds of those who used credit cards in the same time period were over the age of 35, the analysis found. And a Federal Reserve study found that people with low or no credit scores are more likely to use BNPL.

“They get a lot of transaction data, because they have those customers using Cash App almost like a bank account,” Bhatia said. "They see what's going on in real-time with a customer’s financials and they can use that data that they have on that customer to make a better decision than if they just relied on the credit file from one of the credit bureaus.”

Because Block is using its own data, the company's scores might be more predictive of customer behavior compared to a score from a credit bureau, he added.

The decision to let customers see their scores could be somewhat self-serving, Bhatia said. “Maybe if you see your score is going down, you can change your behavior a little bit,” he said. 

Letting users of Block services such as Afterpay and Cash App see those scores could encourage them to make better decisions such as repaying their loans on time, Block’s business lead, Owen Jennings, said during a conference for investors last week. 

Users knowing their score “will drive positive behavior for Cash App,” he said at the UBS Technology and AI Conference on Dec. 2.

Sharing their scores may also help customers of Cash App participate in the broader economy, Jennings said. 

He singled out mortgages and auto-lending as two areas where having a Cash App score could help consumers get better access to credit, although he did not elaborate. 

A Block spokesperson declined to elaborate on his comments.