Block's Juan Hernandez on Cash App Score, the Future of Credit and a New Lending Tool
This week, Block released a new illustrative macro sensitivity tool for Cash App Borrow, providing a first of its kind view into how the Borrow lending portfolio could respond as the economy changes. The tool provides a window into how shifting economic conditions could show up in originations and risk loss under different macro scenarios.
In a discussion as part of our On The Block investor series Juan Hernandez, Head of Credit and Underwriting at Block, walked through the macro view and the foundation that the technology is built on: Cash App Score. Built on customers' Cash App activity, including spending, saving, repayment behavior, and paycheck deposits, Cash App Score is designed to reflect how customers manage money today and provides an alternative to traditional credit scoring, which relies on credit history and leaves many people credit invisible, unscorable, or subprime. As Juan put it, "Cash App Score reflects how customers manage money today, not just their history with credit." He noted that Cash App Score is not a traditional credit score, is not reported to credit bureaus, and does not affect a customer's FICO score. Customers can view their score in the app, see what drives it, and take steps to improve it, and a high enough score can help unlock access to Cash App Borrow.
The technology behind the score now supports underwriting across Block's consumer lending products, approving 38% more customers at the same loss rate compared with traditional credit scores. Roughly 70% of active Borrow customers have FICO scores below 580 while the product performs within Block's target repayment economics, part of why Block is making these credit signals available to external lenders.1
The new macro sensitivity view builds on this same foundation. Because Block's internal credit risk score tracks customers' financial activity within Block’s products including Cash App, it responds to changes in the broader economy. As economic conditions constrict, the aggregate risk score rises, the customer distribution shifts toward higher-risk bands, and Block's score-driven underwriting is designed to tighten in response. This view shows how those changes could affect originations and credit losses under different hypothetical macroeconomic scenarios, and compares potential management responses.
This view is illustrative only, and not a forecast or a formal stress test reflects the Cash App Borrow program only, and draws its scenarios from widely used third-party recession scenario sets. Note that actual outcomes could differ materially.
For the full conversation with Juan Hernandez, click here.