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Block's 'period of potential uncertainty'

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Friday: Block and Opendoor earnings, Starbucks and Meta have NFT plans and Coinbase gets a big-time TradFi partner.

Block and Opendoor scramble

Both Block and Opendoor are scrambling to respond to rapid changes in the macroeconomic environment that are having a big impact on home buying and consumer spending overall.

They’re part of a fintech industry that’s particularly sensitive to interest rate changes and inflation — but both companies emerged relatively unscathed coming out of earnings Thursday, despite some investor concerns.

Both companies’ stocks have fallen in recent months, along with the rest of the market, but both have tried to give investors reason for optimism for the rest of this year despite the potential for the economy to get worse.

Block’s earnings beat estimates, but investors were still nervous. Shares dipped 6% after hours Thursday, as investors seemed to fear potential headwinds later this year.

  • Block said July growth for its Square merchant business was up 18% year-over-year, after rising 29% in the second quarter, which may have spooked investors concerned about the economy. Meanwhile, gross payment volume, a measure of overall spending, was $52.5 billion, just below analyst estimates of $53.2 billion but still up from $42.8 billion a year ago.
  • The company cut non-GAAP operating expense plans by $450 million since the start of the year as it enters a “period of potential uncertainty,” CFO Amrita Ahuja said. It has slowed hiring and pulled back on experimental and less efficient marketing.
  • Block is continuing to bet big on its Afterpay acquisition and touted its boost to its Square unit and its Cash App. The company expects much more in terms of benefits for all three as they benefit each other, said Jack Dorsey.
  • Block is closely monitoring lending loss rates, but “buy now, pay later” from its Afterpay deal saw loss rates of about 1% in the first quarter, a slight improvement from the prior quarter.
  • Revenue for bitcoin, Dorsey’s favorite area for future innovation, sank along with the crypto market to $1.79 billion, which was down 34%.

Opendoor’s earnings showed growth despite a volatile home-buying market. The company is trying to adjust by slowing down its home buying.

  • Opendoor reported mixed results. The second quarter topped estimates, with a revenue increase of more than 250% year-over-year to $4.2 billion, and an adjusted EBITDA of $218 million, compared to $25 million in the second quarter of 2021. But outlook for the third quarter is between $2.2 billion and $2.6 billion, with adjusted EBITDA estimates of $125 million to $175 million.
  • That’s because of “current market volatility” according to CEO Eric Wu. Interest rates have increased mortgage prices, and Opendoor says it’s been forced to reduce the prices of homes in inventory to meet the market. But there’s still buyer demand “consistent” with 2018 and 2019, the company said. Offer requests were higher than ever, increasing 69% year-over-year.
  • iBuying is made for a volatile market, so they say. “One of the structural advantages of our business model is its responsiveness and adaptability to changing market conditions,” Wu said in the report.
  • The company has been broadening spreads since early May and will begin reducing acquisitions, a strategy the company says will help it brace for market volatility. In other words, Opendoor is trying to learn from Zillow’s mistakes last year. The company also has other challenges, dealing with the $62 million fine it’s paying the FTC after the commission said it misled customers.
  • Enemies made nice: The big news of Opendoor’s Thursday call had little to do with earnings — it was a new partnership with Zillow, formerly Opendoor’s prime competitor in iBuying. The partnership will permit Zillow sellers to request Opendoor offers through the site, reducing friction and allowing Opendoor to tap into a massive customer pool primed for selling online.

While the fintech industry has been put through the wringer in the recent stock market downturn, Block and Opendoor offer reasons for optimism — better technology, new approaches to adding customers and growing businesses in their respective markets. They also show some significant reasons for caution going into the fall, with no one having a clear idea of where the economy is headed.

— Tomio Geron (email | twitter) and Veronica Irwin (email | twitter)


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On the money

Sen. Elizabeth Warren is questioning crypto banking guidance. Warren wants the Office of the Comptroller of the Currency to pull a series of Trump-era interpretations that paved the way for banks to offer services like crypto custody for clients.

Goldman Sachs is facing a credit card probe. The Consumer Financial Protection Bureau is looking into the company’s credit card practice.

Meta is readying its NFT play. Instagram users in certain countries will now be able to showcase their NFTs, following a testing phase in May.

Starbucks is also brewing up some Web3 plans. The company plans to unveil coffee-themed NFTs at its upcoming investor day event.

Voyager Digital cleared to return some customer cash. A bankruptcy court judge said that the bankrupt crypto lender can return to customers the $270 million held in a custodial account by Metropolitan Commercial Bank.

Ailing Coinbase gets boost from BlackRock

Coinbase said Thursday it has partnered with BlackRock to give the world’s biggest asset manager’s clients access to bitcoin and other cryptocurrencies. Access to crypto assets will be offered to clients of BlackRock’s Aladdin software through Coinbase Prime, which will provide trading, brokerage and reporting capabilities, according to Coinbase executives.

The company’s stock had recently slipped as Coinbase reeled from the market downturn and Wall Street's concerns about the growing regulatory challenges facing the platform and the crypto industry more broadly. But the BlackRock announcement appears to have restored investor confidence in the company, which went public last year.

The partnership also underscores institutional investors’ growing interest in digital assets despite the dramatic crash of the crypto market, which has shed about $2 trillion this year.

Read the full story on

Benjamin Pimentel (email | twitter)

The chart

Total household debt totaled $16.5 trillion in the second quarter, up $312 billion, or 2%, from the year-ago quarter. Mortgage balances, which make up the biggest chunk of household debt, climbed $207 billion to $11.4 trillion. Credit card balances also posted their biggest year-over-year percentage jump in more than 20 years.


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