Got to find my ex on the stage. There's a nice healthy debate going on back there about what happened with Owen's AV issue. We think he might have unplugged the cord, so just keep that in mind when he was giving the AV guy trouble. So I went the microphone. Anyways, good morning everybody. Thank you for being here and welcome. Extremely excited to get to chat with you all today. I think the last time that we held one of these analyst/investor days in person, it was about 10 years ago right down the street over at the Presidio Officers Club. Some of you might have been there. It was right before our IPO. And I got up on stage and I got to share something I was working on which was Cash App.
And at the time of our IPO, I think it's just like worth calling out that Cash App, it really was a footnote in terms of the investment thesis of our company. You know, I think I had maybe a five minute allocation, maybe two or three slides to kind of get to share the work. I got a little bit more time today and some plugs, so maybe I have a little more credibility this time. But yeah, so today I get to share another project that I've been working on similar to Cash App. It's a network. We've been working on it for about a year and I really do think that this has the potential to have as much impact for Block that Cash App has had, potentially even more. So, I'm hoping that you all get excited about it and understand the potential.
So, just to set a little bit of background context, when I started working on Cash App back in 2013, you know, I kind of started a side project. It was born out of an exploration I was doing at the time to figure out if there were ways where we could lower the cost of payment processing on behalf of our sellers. And in order to do that, I knew that I would need to create a product that could achieve mass market scale with a cost of funding advantage. And so as a result, we started exploring ideas in the peer-to-peer payments landscape. And so we started working on a product that we called Square Cash at the time, kind of symbolizing the connection between the two ecosystems.
And what I thought would be, you know, just a smart small side project ended up being a 12-year journey. So about a year ago, I stepped away from the day-to-day management of Cash App to kind of see if I could create an experience that would bring the original vision of Cash App back full circle to see if we could drive economic empowerment for our sellers and consumers in a much more deep and even meaningful way.
So we began our exploration by looking at the neighborhood, you know, a place where we believe that the opportunity for driving economic empowerment truly comes to life. And so, you know, in many ways, I've always thought about neighborhoods as representing the battleground for the cultural identity of our society. In the ideal scenario, you know, our neighborhoods are fueled by a thriving small business economy where local business owners and entrepreneurs feel inspired to be their most creative selves, where they can pour their creativity into their storefronts and into their products. But all too often, our neighborhoods don't end up looking like this. They end up looking a bit more like this.
Thanks for the laugh. You know, we've all visited communities like this. You know, you kind of take the 50 largest national chains, you plop them down in a predictable grid. And these aren't places that inspire us. They're not places that we, you know, like to linger. They're places that kind of stress us out. We visit them if we're hungry or if we have to buy something. They're very utilitarian. And so, you know, the unfortunate reality though is that these national chains, you know, they have tremendous resources. They're well capitalized.
They have repeatable playbooks for opening new locations and spreading. They have robust software offerings for streamlining their operations and managing cost. And increasingly they're developing really sophisticated digital strategies for not just acquiring new customers but in some ways even more important in today's environment, retaining the customers that they have, establishing first-party relationships, direct relationships with their consumers and re-engaging them.
You know, at the heart of these digital strategies, kind of a theme that we've seen play out over the last 10 years is that we're increasingly seeing national chains investing in their own first-party mobile applications. And these applications, for the most part, they kind of do the same thing. They tend to wrap some sort of online ordering utility into a rewards program. And you know, these national chains are really invested in distributing these. If you walk down the street, if you walk into their store, they're thinking about the kind of customer life cycle in their store.
They'll oftentimes have a big, you know, sign plastered on their window prompting people to download the app, maybe signage at the point of sale to download their app. And it's essential that they do this because they're trying to avoid being disintermediated and giving up their customer relationship to third-party delivery marketplaces. And for the most part, this strategy, it's really working, as we kind of see here from the app store rankings, some of these apps represent the largest apps in the food and beverage section of the app store.
And so, you know, what started off kind of as a strategy of like the largest national chains has actually become the default playbook that we see for most of the national chains within the United States. Develop a relationship with their customers directly so that they can build a followership of downloads. They can send marketing campaigns. They can directly engage their customers. And you know, we talked to a lot of local businesses and they kind of see this theme playing out and they have the exact same objective like they don't want to be disintermediated either.
They want to make sure that they're establishing a direct relationship with their consumers. They don't want to give up their customer relationship to marketplaces. And so a lot of them have kind of pursued the same strategy of trying to build their own mobile applications. But we think that this is a futile effort. I don't think that this is likely to work. And for some of us, you know, maybe we've seen some of these applications, but the problems with them is, you know, we consumers really don't have an appetite to, you know, download dozens of mobile applications for every restaurant or QSR that you would visit.
We all have tons of apps on our phone. They kind of get lost in the clutter. We don't have an ability to kind of manage dozens of logins. We don't have the capacity to manage dozens of fragmented loyalty programs. These apps tend to not have the scale for any one of the sellers to build up a stored balance, a stored balance system to drive down the cost of processing. It just is not a strategy that we think is worth pursuing for local businesses and we don't think it's going to work. So that's why we built Neighborhoods.
And so with Neighborhoods, we rolled this out a couple weeks ago at Fall Releases. For those of you that are there that just heard me say a lot of what I just said, I promise you the rest of the presentation is different. But so that's why we rolled out Neighborhoods. So with Neighborhoods, what we're able to offer to our sellers is we're able to offer them a software offering that gives them all of the same capabilities of having their own mobile applications, all of the same benefits without having to manage the complexity, without having to invest the cost, without having to figure out how they're going to invest in a distribution strategy to get that application distributed. It's an ecosystem that exists within Cash App. And I'll explain in a second kind of some of the features that our sellers are able to get with this.
So the first thing that we're offering our sellers with Neighborhoods is a first-party online ordering profile. So when their customer downloads Cash App, they receive a profile. And this profile has all the same capabilities that you would otherwise get with an application. It has an ability to order directly from within the application.
We built a network-wide reward system that works as part of the program, all stored within Cash App. So instead of consumers having to manage dozens of different loyalty programs, it's one loyalty rewards program called Local Cash where if you acquire Local Cash at one seller, you're able to spend it at another seller. So we're able to create kind of economies of scale and a strength in numbers so that the local businesses are able to compete more effectively with local chains.
Because this is built into Cash App, we have a pooled stored balance account which leverages the Cash App stored balance so that we're able to help drive down the cost of processing for sellers that are adopting Neighborhoods. And I'll talk about that in a second.
Sellers are able to build a loyal base of followers just like they might, you could imagine if they were building an Instagram followership or something or like another social media platform that we're able to drive followers instead of downloads. And those followers, once a seller acquires a follower, we're going to provide an offering that behaves just like if they were to get a download because we're offering a free suite of marketing tools for the sellers to reach their followers. There's no payment. They don't have to pay to engage their own customers and there's no gatekeeping and no additional fees.
So next I'm going to kind of walk you through a demo of the customer journey for how Neighborhoods works. And so it begins in store right at the point of sale. I was walking down the street just yesterday down on Chestnut Street. There was a large national chain. They had a big billboard or it was like a window plastering in their window kind of promoting their digital application or their mobile application. So we have a very wide network and distribution of buyer-facing displays. Many of you have seen them in your local neighborhoods right at the point of sale. And we can start our journey by promoting Neighborhoods right at the point of sale. And just like you might see an opportunity to download a mobile application, customers are prompted to follow the seller and earn rewards on Cash App.
As they move through the checkout flow, there's an opportunity to follow the seller. And then as they move through the flow, we're using Local Cash rewards, which is a cashback program. It's an in-network loyalty program where you can scan the reward and you can save the seller's profile directly into Cash App.
So this is Cash App. And so once you enroll for Neighborhoods, you have a new experience, right, it's called the Neighborhoods tab on Cash App. And now you can see you're following that seller. You have their card. You have your Local Cash balance which you accumulate across sellers. And you can see your order progress right in the middle outlet there.
So, just to kind of help illuminate the opportunity here, we have a massive distribution of quick-serve restaurants within the Square platform. Today, we see we have over 250,000 locations that are already on Square. And at those locations, we see over 320 million unique cards every single year, just to kind of give you a sense for like the scale of our distribution, the scale of our reach.
And so, you know, we've been testing Neighborhoods now for a year. We have different cohorts. And this is what the core curves look like in terms of how effective we've been at acquiring consumers at a given seller into Neighborhoods. You could see each quarter that we've like iterated on that experience, we've gotten stronger than the last quarter. And so you can see these curves, we haven't really seen the potential of where these go. Right now, they look like they're just up and to the right in a completely linear way.
And if we look at some of the examples for some of the sellers on our platform that have really leaned in, we've been able to achieve almost enrolling almost 10% of their customer base in just the first six months of them being live. And that looks like it's still continuing to grow.
Now the most exciting thing for us and I think in terms of the investment thesis for Neighborhoods is that approximately 50% of the people that are enrolling in Neighborhoods were not active on Cash App in the last quarter, which represents a massive opportunity for us to bring new Cash App customers into the ecosystem and continue scaling the Cash App network. We think this is a huge competitive advantage in terms of our proprietary distribution channels to continue growing the Cash App network. Bring sellers onto Neighborhoods, turn the network on, see customers come into the ecosystem.
So coming back to the demo. So once a consumer adopts Cash App, now they have the Neighborhoods tab on their phone and now the profile acts just like it would if they had that seller's mobile application. They can order directly from the seller. They can do pickup. They can do delivery.
They can browse items. Here we'll look at what pastries are available. We'll select an almond croissant. We'll add it to our cart. And this is where the Local Cash reward system can come into play. You can apply your Local Cash to the order. So, as you're earning Local Cash at the seller, you can apply it, kind of creating a consumer advantage or consumer use case for them to want to order through this channel versus other channels. We can check out.
So the other thing that we're really excited about with this is because we're leveraging Cash App. You know, Cash App brings in over $300 billion a year in inflows, we have a large stored balance pool that we've been able to create within Cash App that we're allowing our sellers to leverage to bring down the cost of payment processing for them. So instead of them investing in their own mobile application trying to build their own stored balance or their own top-ups where they might bring down the cost of processing, we're allowing sellers to leverage our stored balance ecosystem to bring down their cost which we've seen to be a really really compelling reason why sellers are wanting to adopt this. If they can drive sales to this channel, it helps bring down their cost.
Now, I think something that's important to kind of highlight here is that this kind of strategy in terms of our pricing, this isn't about us trying to kind of create a new payment margin business where you charge 1% and we're trying to make a lot on the spread between our cost and the 1%. This strategy is all about building a network that has tremendous value for sellers and tremendous value for consumers so that we can create network scale so that we can bring sellers into the ecosystem through this pricing mechanism and then allowing us to bring consumers into the ecosystem as well. That's what our strategy is here.
So moving along with the demo, this is just showing as you kind of move throughout the neighborhood as you find sellers that are on Neighborhoods, you can follow multiple sellers. It's simple. It's all consolidated right in your Cash App. You can follow multiple sellers and as you're building up your Local Cash at sellers, you can spend across the ecosystem.
So again, I think that the right mental model for you to kind of think about this is this is all about a seller building their own following. This is almost like an anti-marketplace where they're not getting kind of commoditized where their items are getting kind of commoditized within a supply. This is about them building their own followership and we're kind of putting our money where our mouth is by giving them a suite of marketing tools for them to reach out to their customers directly once they follow them.
So this is a view of Square dashboard. I can see how many followers I have. I can see how much Local Cash they've redeemed at my store. I can see what kind of demographics we have and how much revenue they're generating. And so as I build up my followers, I can compose campaigns to engage in.
So in the same way that if I were to build my own application, distribute my own application, one of the main reasons that sellers do this is so that they can send campaigns, send push notifications, offer free items to keep them coming back. So a seller can compose a campaign. In this case, we'll select our entire audience. But you can cut this by, you know, lapsed customers. I can compose, send out a free croissant to my followers all for free without any payment for us. As long as it's for your own followers, you can send it out.
And then the consumer is in Cash App. They can receive that message. In this case, I have my free croissant. Now, one of the most important things here, the reason why this is so powerful is because we built this in a way where there's a catalog available in the profile. There's online ordering in the profile. These campaigns kind of serve as like a bankable item. Now, I have a bankable item of offers for my sellers to re-engage. I can click on the offer, I can add it to my cart, and then I can order that item for free. And you can see the discount is applied. So, I'm not paying anything for the croissant.
So, you know, we're extremely excited about Neighborhoods. We have sellers in San Francisco. We're just starting to roll out. Two of these sellers are actually in the hall right now. And so you can try the two coffee carts, Neighborhoods is turned on for the enrollment flow. But I want to just kind of highlight, we're just showing San Francisco here, but the way that we built Neighborhoods is we built it in a way that it becomes stronger the more sellers that are in the neighborhood that are adopting it, but we don't have to rely on supply-side saturation in order for the strategy to work.
We built it in a way where it can replace any given seller's mobile application. So, it works in a one-to-one way. What this means is that we're rolling Neighborhoods out nationwide. We're not going city by city right now. So there are sellers that are on Neighborhoods right now all across the country. And we're not having to kind of use a traditional local marketing rollout motion. But this just kind of shows you where we're at in San Francisco. And this just kind of highlights the opportunity of our current distribution. These are all the Square seller QSRs that are in San Francisco today.
And so our work right now is about a go-to-market motion where we get sellers turned on. I want to kind of highlight this is a motion for us. This isn't like an automatic, we don't just turn this on for sellers by default. We have to make sure that they have quality supply, that their catalog is up to date, that they're ready to take online orders and set up on our system. We need to make sure that the Local Cash reward system that they're in agreement with that. So, this is a distribution motion for us to get as much supply on the network as we can.
But what we've spent the time over the last year doing is really dialing in the consumer adoption curve at the point of sale. Making sure that as consumers are adopting it, they're finding value, that they're re-engaging in the ecosystem, that they're ordering. And we find that funnel right now to be really stable. So all of our effort right now is all about scaling Neighborhoods on the supply side. So with that, I'm going to pass it along. I think I'm two minutes over. So let's see. That's the end of it. Thank you.
