The news of the move comes as part of Block’s pledge earlier the year to ensure that its investments are focused on customer retention as it aims to pursue profitable growth over the long term.
Clearpay is Afterpay’s denomination in the European Union. Block completed the acquisition of Australian Afterpay in 2022. What is more, Block, formerly known as Square, which remains the company’s merchant business unit, acquired the European peer-to-peer payment app Verse in 2020.
As confirmed in the company’s second-quarter earnings call, these operations required significant investment, and the markets have failed to see the growth and profitability expected over the past years, as detailed by Block Head Jack Dorsey, with the spokesperson having also added that they see an opportunity in shifting these resources toward strategic areas with a higher potential return on investment.
Having these goals in mind Dorsey added that executives might identify other areas where Block is not seeing necessary returns. What is more, the company decreased its pace of hiring and sought to pull back on sales and marketing spending, as the company’s operating expenses in Q2 2023 rose by 19% to USD 2 billion, as per the quarterly shareholder letter.
In March 2023, Forbes reported that Spanish-founded Verse was admonished and fined USD 250,000 by its banking licence provider the Bank of Lithuania in relation to anti-money laundering (AML) deficiencies.
More so on shuttering Verse operations, Block CFO Amrita Ahuja believes this will help bring an impact on monthly actives going forward, yet there is no expectation for an impact in relation to inflows or gross profit. As detailed by Payments Dive in the article highlighting these decisions, Cash App had 54 million monthly active users in June, a 15% year-over-year increase.
When talking about the BNPL space, the competitive dynamics among these service providers have intensified throughout the past months, whereas macroeconomic headwinds have put pressure on both their operations and customers. BNPL rival company Affirm announced its decision to cease its operations in Australia earlier this year and, similarly, BNPL player Zip announced that it shuttered operations in several markets, including Mexico and Singapore.
Despite this having taken place, Ahuja further highlighted that Afterpay’s gross merchandise volume in Q2 rose 22% year-over-year to USD 6.4 billion, whereas losses on consumer receivables were 1.01% of GMV, added the spokesperson.
As per the shareholder letter, Block reported its seventh, consecutive quarterly loss, amounting to USD 123 million. Total net revenue increased 26% to USD 5.53 billion, and excluding bitcoin revenue, quarterly revenue was USD 3.14 billion.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now