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As CEO of Twitter, Jack Dorsey was widely panned for his hands-off style, seen as contributing to the company’s uneven growth and slow-to-evolve culture, which paved the way for last year’s takeover by Elon Musk. Dorsey’s other public company, Block, originally known as Square, has a whole different problem: Its divisions feud so intensely they can’t agree on even minor points of cooperation.

For example, last year staffers from Square, a payments processing service popular among small and medium-size businesses, and its sibling division, Cash App, which is similar to Venmo, got bogged down in a negotiation over sharing technology to integrate Apple Pay’s Tap to Pay on iPhone feature. No one from Block, including CEO Dorsey, intervened to resolve the fighting. Today, the dispute still hasn’t been resolved: While Square offers the Tap to Pay on iPhone feature, Cash App doesn’t.

THE TAKEAWAY

• Square and Cash App staffers fought over Apple Pay deal

• Fight reflected culture of divisional autonomy

• Dorsey now wants Block units to work together more

The dispute’s business impact is likely small: the feature is important to merchants, who are more likely to use Square than Cash App to accept payments. But the disagreement was emblematic of a major issue at Block: Employees on different teams have trouble working together. That issue threatens to hurt Block’s ability to become an interconnected marketplace for financial services as Dorsey has envisioned.

Internal rivalries between company divisions is an age-old problem, endured by firms as diverse as film and TV empire Time Warner in the 1990s and Microsoft before Satya Nadella took the reins as CEO. One reason siloes exist, however, is that giving different units autonomy often helps them grow faster.

That was the case at Block, a 14-year-old financial services firm founded by Dorsey under the original name of Square. He has since built it into a financial tech powerhouse with annual revenue of $18 billion and a market cap of around $25 billion. In valuation terms, Block is smaller than fintech firms such as Stripe, most recently valued at $50 billion, and PayPal, which has a market capitalization of around $55 billion. It is significantly bigger than “buy now, pay later” company Affirm, which has a market capitalization of about $5 billion.

While Block started by offering a way for small merchants to accept credit cards, its launch of Cash App in 2013 helped it broaden into the consumer market. But in the wake of Block’s biggest expansion—its all-stock acquisition of buy now, pay later firm Afterpay in January 2022, a deal then valued at $29 billion—Dorsey has changed tack. He wants the company to evolve into a one-stop shop for payments technology, whereby each of its parts is made more valuable by connecting with the others.

For example, employees at businesses that use Square could receive their paychecks through Cash App, Dorsey has said, while fledgling entrepreneurs selling their products through Cash App could become Square customers as their businesses grow. Afterpay, meanwhile, would bring more business to Square’s merchants and allow Cash App users to pay for a wider range of items in installments.

First, though, Dorsey will have to change Block’s culture of independence. The company’s units have often struggled to cooperate, acting at times as if they were competitors, according to former employees.

“They have not been able to really show, just yet, how all these things are interconnected,” said Dominick Gabriele, an equity analyst at Oppenheimer who covers the fintech industry.

Rivalry extends to teams within units: Members of one Square team last year became frustrated that they couldn’t simplify the Square app’s checkout process because other teams controlled parts of the process. So they built a prototype of a simpler app that would compete with the main Square app, according to a former executive. The team ultimately decided not to launch the competing app because it didn’t have enough staff to keep it running smoothly after its release.

Finding more ways for its businesses to help each other could reignite the growth of Block’s gross profit—a metric some analysts see as more important than revenue because it excludes unavoidable expenses like the transaction fees Square passes along to credit card networks and the cost of the bitcoin that Cash App sells to its users. Last year, Block’s gross profit growth slowed to 36% from 62% the year before and 45% in 2020. Growth slowed further in the first half of this year to 30%.

Though Block’s cumulative growth since before the pandemic has been impressive, said Dan Dolev, an equity analyst at Mizuho Securities who covers the fintech industry, the company’s inability to connect its businesses may explain why investors are pessimistic about its prospects. Block stock has dropped around 80% since the beginning of 2021. By comparison, the Nasdaq-100 Technology Sector Index has risen 1% over that period.

“The narrative right now is not good,” Dolev said. To change investors’ minds, the company will have to be more successful in making its businesses work together, Dolev added.

Even Dorsey has acknowledged the divisions within Block at least twice since last year, according to three former employees, expressing dissatisfaction with the number of “silos” inside the company during an all-hands meeting and adding that he wants to improve how Block’s units work together.

A Block spokesperson didn’t have a comment.

Cash App Versus Square

The most obvious rift within Block is between Square and Cash App. Cash App is run by longtime Block manager Brian Grassadonia. Until earlier this month, Square had been run by former Amazonian Alyssa Henry, although she has since departed. Dorsey didn’t replace Henry but took the reins at Square himself.

Rivalry has been an issue for years. In 2019, when Square was adding Cash App as a payment option to its point-of-sale tablets, Cash App’s product team wouldn’t agree to share some of the data Square’s product team wanted, such as details about the customers who used Cash App to pay at Square terminals. The Square team thought that data would help them more easily detect fraud on Square and allow Square merchants to create more effective marketing campaigns, according to two former managers familiar with the talks.

Cash App staffers wanted to protect the privacy of the app’s users, relying on technology that can limit the risk of hackers stealing credit card information. Instead of sharing the user data, they said Cash App would assume the risk of fraudulent transactions, one of the former managers said. In addition to squabbling over data, the teams took months to decide on a revenue-sharing agreement for the fees the Cash App transactions would generate from Square merchants.

Eventually the quarreling teams agreed on an even split.

From the point of view of Block, the parent company, the allocation of revenue between the divisions has little significance. The consolidated profit statement that Block reports publicly excludes fees paid by Cash App to Square, as well as the other way around. But those fees do affect divisional revenues, which the company does report publicly. And the profits of each division determine the future budgets they receive, which gives them an incentive to fight with each other, even at the expense of the company’s overall well-being.

The biggest fight between the two units was over Apple’s Tap to Pay on iPhone feature, which launched in 2022. Months later Square began rolling out the feature to its customers.

Apple’s Tap to Pay feature allows shoppers to quickly pay for items by placing their smartphone or credit card on a merchant’s iPhone. Adding the feature to Cash App would allow merchants who use Cash App to receive payments from customers who don’t have it.

Cash App was already integrated to some extent into Apple Pay: Since 2016 Apple users with Cash App’s debit card have been able to add their card to their Apple Pay wallets and make contactless payments. But merchants couldn’t receive those payments through Cash App. And unlike Square, Cash App hasn’t built the technology to connect merchants with credit card networks, so it would have to buy that feature from Square or another payment processor that specializes in making those connections.

Staffers from Square and Cash App couldn’t agree on the terms. Square staffers wanted to charge Cash App a fee to use the Tap to Pay technology, since Square would be processing the payments on Cash App’s behalf. Cash App staffers, meanwhile, asked for a bigger cut of each transaction than Square was receiving from Apple.

Cash App employees were also frustrated that their Square counterparts wanted them to adhere to technical requirements forcing them to add software code to the app that could make it too large for new users to download over cellular data networks. They threatened instead to buy the Tap to Pay feature from a rival payments processor like Stripe or Adyen.

Square staffers were further irritated that Cash App didn’t want to give them data on Cash App users that could help Square sell more of its products. The best outcome for Block would have been for both sides to share their technology and data freely, as time spent hammering out terms wouldn’t help Block’s bottom line. But that’s not what happened.

Since Dorsey has called for more cooperation between units, signs of change have emerged. For example, last year, the company expanded a team focused on cross-unit engineering projects, such as moving more of its computing infrastructure to Amazon Web Services, according to five former managers.