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Operator
be 9% on a three-year CAGR basis. Our developer tools have helped us serve the needs of larger, more complex sellers, allowing us to grow up market. During the third quarter, nearly 50% of mid-market GPV was generated by sellers connected to our open developer platform. Second, we continue to expand globally. In the third quarter, GPV from our markets outside the U.S. grew 40% year over year, or 55% on a constant currency basis. As foreign exchange, there's been significant drag on a year-over-year growth across all international markets. Looking at volume trends by market in the quarter, growth in Australia and Canada remained strong while we saw a macro-related slowdown in the UK. Now to provide an update on our BNPL platform, which we acquired through the Afterpay acquisition. In the third quarter, GMV for our BNPL platform was $5.4 billion. up 10% year-over-year, or 60% on a three-year taker basis. For overall growth trends, we've experienced an impact from spend shifts from online to in-person, competitive dynamics, as well as foreign currency, which slowed year-over-year GMV growth by five points in the third quarter. As we integrate Afterpay, our teams are focused on bridging commerce across Cash App and Square and are making steady progress towards our longer-term vision. On a GAAP basis, revenue for our BNPL platform was up 6% year-over-year, growing slower than GMB given mixed shifts to enterprise sellers and newer markets. Gross profit was down 3% year-over-year, impacted by $12 million in amortization of intangibles within cost of sales. Without this impact, gross profit would have been more in line with revenue growth. Losses on consumer receivables were 0.96% of GMB during the third quarter, an improvement quarter-over-quarter compared to 1.02% in the second quarter, and an improvement year over year, driven by mixed shifts as well as enhancements to our risk models and processes during the first half of the year. We continue to see healthy consumer repayment behavior with more than 95% of installments paid on time. As we enter into 2023, we intend on simplifying many of these disclosures. We don't intend on speaking to our BNPL performance separately once we anniversary the acquisition of Afterpay. And we'll also shift our focus away from three-year CAGRs and towards year-over-year growth rates as we lap the onset of the pandemic three years ago. Next, an update on recent trends. On both a year-over-year and three-year CAGR basis, October total gross profit growth is estimated to be relatively consistent with the third quarter. In October, We estimate overall company gross profit growth of 37% on a year-over-year basis, including our BNPL platform, or 24% excluding our BNPL platform. We expect fourth quarter gross profit growth to remain relatively consistent with third quarter growth rates on both a year-over-year and three-year CAGR basis at the total company level. Now let's dig into some of the dynamics by ecosystem. For Cash App, we expect the year-over-year gross profit growth rate to improve in the fourth quarter compared to the third quarter. We saw this play out in October, where we estimate Cash App's gross profit growth, excluding our BNPL platform, improved on a year-over-year basis compared to 37% in the third quarter. On a three-year taker basis, we expect to see a slight decrease on Cash App's gross profit growth in the fourth quarter relative to the third quarter as we lap the launch of TABS in 2019. Cash App's gross profit growth in October was driven by growth in actives and monetization rate, while inflows per active was relatively consistent on a year-over-year basis. Cash App Card continued to have strong momentum on actives and spend per active, which both increased on a year-over-year basis. For Square, we expect the year-over-year growth rate for gross profit, excluding our BNPL platform, to moderate in the fourth quarter compared to the third quarter. given we are now lapping $59 million of non-recurring PPP gross profit recognized in the fourth quarter of 2021. Excluding PPP and our BNPL platform, we expect year-over-year gross profit growth for Square in the fourth quarter to be relatively consistent with the third quarter, which had a 19% year-over-year growth rate with the same exclusions. On a three-year CAGR basis, we expect gross profit growth, excluding our BNPL platform, to decrease slightly in the fourth quarter relative to the third quarter. Looking at recent volume trends, we estimate square GPV in October was up 16% year-over-year compared to 20% growth in the third quarter, and on a constant currency basis, 19% year-over-year as compared to 22% in the third quarter. Trends on a three-year CAGR basis were more stable, as we estimate GPV grew by 21% in October, compared to 22% in the third quarter. By region, growth in the US remained relatively stable through October. However, we've seen a meaningful slowdown in year-over-year GPV growth in our international markets, primarily driven by foreign exchange rates, and to a lesser extent, the ongoing macro-related slowdown in the UK. In October, we estimate that international GPV was up 23% year-over-year or 44% on a constant currency basis. Moving to our planned investments for the fourth quarter of 2022. While our business trends have remained stable through October, we have been increasingly focused on our spend amidst an uncertain macro environment. We plan to reduce our investments for the full year 2022 by an additional $140 million. which brings the total pullback on our planned non-GAAP operating expenses on the year to $590 million, or approximately 25% of our expected step-ups entering the year. For the fourth quarter, we expect to increase non-GAAP operating expenses by $206 million compared to the third quarter. Looking ahead to 2023, we are still in the process of finalizing our plans for next year. And while we aren't quite ready to share specifics, we wanted to give you a sense of how we are thinking about next year. Over the past several years, we've significantly grown our business and our expense base. Looking to 2023, we're focused on operating more efficiently, and we expect to slow our pace of expense growth meaningfully compared to prior years. Based on our preliminary plans, our outlook includes a slowdown across several areas of our discretionary expenses, a continuation of the discipline you've seen from us in recent quarters. In particular, two areas to underscore. First, hiring. Headcount makes up the largest driver of our expense base. In 2023, we expect to significantly moderate our case of hiring compared to recent years, which will benefit our financial results on the lag, with greater leverage on headcount costs expected in the back half of 2023 and into 2024. Second, sales and marketing. In 2023, we intend on pulling back on lower ROI, more experimental areas, including brand and awareness spend, across both our Square and Cash App ecosystems. and continue investing in channels with more proven ROIs. Outside of these, one-third of our non-GAAP operating expenses include variable expenses, which has historically grown more in line with overall gross profit, including transaction and loan losses, peer-to-peer costs, cash-out card issuance costs, and expenses related to data and our platform infrastructure. We continue to see a compelling opportunity for long-term growth, and we're prepared to be dynamic with our spend as we see the macro environment play out. both investing more when we see returns and pulling back with lower or uncertain returns as we've done in the past. We'll look to share more on our approach for the coming year in our fourth quarter earnings call in February. Ultimately, we remain focused on balancing growth and profitability in this environment. We want to operate with efficiency and agility in 2023 and beyond, with an increasing focus on not only top-line growth, but also profitability across both adjusted EBITDA and profit metrics that factor in stock-based compensation. where we intend on driving leverage over time. To conclude, as we enter an uncertain macro environment, our agility means we can track our business trends in real time across a diverse set of products and customers and make strategic decisions quickly to support our customers and adapt to the changes we observe. With that, we'll open it up to your questions.
Cash App
At this time, I would like to remind everyone, in order to ask a question, press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. In the interest of time, we request that you limit yourself to one question. Your first question comes from the line of Chen Xinghuang with JP Morgan. Your line is open.
Chen Xinghuang
Thank you. It's nice to see the strong revenue, gross profit, and EBITDA here. So I just want to Bill, on what you just talked about there, Amrita, just thinking ahead, I know you're not going to give too much specific guidance for fiscal 23, but is it reasonable to expect that Block is now in a position to show some operating leverage in 23, given the less certain macro and, you know, you've invested quite a bit? It looks like you're getting good returns since the bottom of the pandemic here, but can we get back to operating leverage when we get back to 23? Thank you.
Operator
Thanks for the question, Tintin. We are focused on driving long-term profitable growth at scale. And what that means for us is that we're going to balance growth and margins in our investment framework. As you note, given the significant growth of our business, we've grown our investments over the past few years to create products and marketing engines that help us drive that top-line growth, paired with profitable unit economics across both of our ecosystems. Our preliminary 2023 plans really significantly moderate that expense growth as we focus on balancing growth and profitability. Longer term, we will continue to moderate that expense growth to drive increased operating efficiency, profitability, and specifically for Cash App, we do expect to see operating leverage next year. We'll have more to say in February, of course, as we're still in our planning stages across the business. Our focus ultimately is on agility. As the environment continues to evolve here, we want to remain agile and be able to adapt to what we're seeing. And we intend on maintaining the discipline that you've seen so far this year with the pullback and discretionary operating expenses, particularly in those areas that are less efficient, or conversely, lean into areas where we are seeing attractive returns and that enable us to grow our business in a profitable way over time. We've proven that ability to kind of dial back expenses in real time. So far this year, we've pulled back almost $600 million, about 10% of our planned OpEx space, or 25% of the step up where we haven't seen returns or where the returns are less certain in order to deliver more near-term profitability. That gives us the confidence in our ability to continue to invest and help us determine how much is needed to drive that next incremental dollar growth and where we should be prioritizing our investment over time.
OpEx
Got it. Thanks for going through that. Your next question is from the line of Lisa Ellis with Moffitt Nathanson.
Cash App
Your line is open.
spk08
Terrific. Thanks for taking my question. I just wanted to follow up that call out in your shareholder letter and prepared remarks about the 18 million monthly cash at card users. You now have 35% of total monthly active Can you elaborate a bit on the nature of the cash card users? So, for example, do you have a sense for how many cash card users you now have using the cash card as their primary debit card? Or, like, are these banks consumers or is this their primary bank account? And what steps are you taking to kind of keep building out the wallet share of those cash card users? I think you had highlighted that. Investor Day, they drive something like five times as much gross profit as a non-cash card user. Thank you.
Operator
Haley, so thanks for the question. I can kick off here. Driving product adoption for us across our banking products is one of our primary focus areas within our Cash App pillar around financial services. And we've experienced strong attach rates here. These financial services products allow us to really deepen our relationship with our customers beyond just peer-to-peer and serve them more holistically related to their finances. So specifically for Cash App Card, as you know, 18 million monthly actives in September are growing 20% – or sorry, growing strongly and then now growing in terms of the cash at 35% of our monthly actives during the month. And also with strong engagement in September, Cash App Card actives made 16 purchases during the month on average. So we're seeing our customers using their card on average every other day. and really with broad-based utility, with customers spending across a diverse range of use cases, gas and utilities, restaurants and grocery, various retailers, and with spend that's increased over time on a per-user basis. So in the third quarter, spend per active grew on a year-over-year basis, as we see our customers bringing more of their spend to Cash App Card. And as Jack noted, Cash App Card customers accounted for about half of overall inflows into Cash App, to your point about the importance of this customer base to our ecosystem. And these customers have also a significantly higher monetization rate, compounding together as they bring more inflows at a higher monetization rate to drive even greater gross profit from this Cash App Card customer cohort. Maybe the final thing that I'd say here is that Cash App Card is an important way for us to bring Cash App to greater top of mind from a financial services perspective. Certainly top of wallet for our customers, bigger part of a core offering as we graduate our customers from peer to peer into the ease of use of our financial services products. And we see that really resonating with younger demographics, but also as a way to drive greater adoption into other banking products like direct deposit. where we've now eliminated the friction of allowing customers to create a direct deposit account the moment they sign up for Cash App Card, and which has, though it's still early days, has meaningfully increased the adoption of direct deposit as well for us. So it's important in and of itself, but also important as a gateway to adopting other banking products within Cash App.
Haley
I'll just say to your question, we don't have the data on whether we're primary against other other cards or other banks, but that is certainly our goal. And I think we have a better strategy over the long term in that we're not, you know, we are not just a card. We are not just savings. Our other features that we offer, including, you know, the Discover tab to find commerce, Bitcoin, stocks, deposits, people peer to peer, obviously, which is, you know, the easiest way to send money to anyone. People come in for various different reasons, and they will find our other services. And ideally, those services resonate even more. And, you know, our goal at first is to be first consideration for any one of these services, including the Cash App card. But over time, you know, we want to work towards being primary because everything that you need in your financial life, you can find within Cash App. So that is a goal that's what we're focused on.
OpEx
And I think we have the best strategy to get there. We have Allie Tennis, Square seller, dialing in to ask a question.
Cash App
Please go ahead. Your line is open.
spk09
Hi, Jack. Thanks so much for taking my question. My name is Allie, and I own Sugar Lab Bake Shop in Ventura, California. We've been using Square to run operations at Sugar Lab for the last 10 years, which is as long as we've been in business. We've grown to over 45 employees over the years, not currently, but we do use several Square software and hardware products, including stand, point of sale, marketing, loyalty, savings, payroll, and more, pretty much everything. And then I'm also a Square super seller. So my question is, as the tight labor market continues in the food industry, we have fewer bakers and kitchen staff this year. How can Square help us prepare to handle the seasonal rush? And what are ways in which I can attract talent in time for the holidays, especially given that we're competing with larger businesses?
Haley
Thank you, and congrats on your business. I think the biggest thing here is anything that we can do from a technology perspective to give you time back. First and foremost, to make sure that you're not wasting a bunch of time hooking up different systems and fiddling with interface, that all the solutions we provide are intuitive and they get easier and easier and potentially even more automated. Um, so that you can focus more on what you have and doing a whole lot more with, with less. Um, so that is the first part. And we're, we're focused a lot on, on that internally, but there are also products that, um, we'll take some of the workload off you, such as self-serve ordering and, um, square payrolls on demand pay, um, and also making it much more efficient for your employees. So our team management product, I don't know if you've used that yet, we focus a lot of energy on making sure that the team and the employees, and you have 45, so you're at a state where it could be quite useful, that they have all the information they need to help you operate and run the business very efficiently. All of these things that we're doing today, we're going to continue to improve with more automation more artificial intelligence that you can turn on and off and really make informed decisions around how you run your business. And as you continue to grow your business, it becomes more and more attractive to more people. So by focusing on your customers and making sure that you have your time focused entirely on that instead of all the operational capacities or needs of your business, which is where we come in, your business gets more successful and more people want to join. So
OpEx
Thank you for using Square, and we'll keep at it. Your next question comes from the line of Darren Peller with Wolf Research.
Cash App
Your line is open.
spk00
Hey, guys. Thanks. Look, just following up a little more on Cash App, the combination of monthly active user strength continues as well as the gross profit. Looks like attach rates, the card was a key part, but if you could just remind us on what you see as the real opportunity there in terms of attach rates on different products and really what the path is for ARPU when layering in not only what you've already done on sort of the financial services side, but also what kind of opportunity pay with cash can be and how the progress is going there too. Thanks, guys.
spk15
Hey, Darren, thanks for the question.
Operator
So, let me start with kind of where we are in terms of ARPU, which is, you know, another metric you can measure along with the overall inflows framework, and then talk about where some of our product priorities fit based on where we're driving, you know, key elements of the inflows framework forward. So, from an ARPU perspective, you know, gross profit per active, excluding the BNPL platform, was $57 in the third quarter, up from 53 in the second and $50 in the first quarter. So we are continuing to see growth there, in part driven by our monetization rate, in part driven by the increased utilization of the platform, strong engagement on the Cash App platform. If you break that down across our inflows framework, what we look at is actives, where we've continued to see strong growth, inflows per active, which we've seen continued stability despite now lapping some of the significant government disbursements, and even some of the seasonal tax benefits from the first half of this year. And then monetization rate, where, as I said, we have some products where we can flex our pricing and some products where we are driving engagement and driving utilization. That inflows framework is really clarifying for us in terms of our product roadmap and where we see the traction across each of those variables. And so the three top You know, product development pillars that I'd call out are financial services, network growth, and trust in terms of being able to continue to drive the Cash App platform forward. From a financial services perspective, you know, as you've noted, we've seen growing adoption here, and that's a key top priority for us in the 2023 to see continued adoption of these products. across not only Cash App Card and direct deposit, where there's a lot more for us to do there, strong traction but continued runway ahead, but also through some of the newer products that are continuing to take hold, like Cash App Pay, as you noted, where we see 60% of Cash App Pay volumes are now from customers who aren't active in Cash App Card, showing that strong brand affinity for our products beyond even a strong attached product like Cash App Card. And also for products like Cash App Borrow, which we're still in the early days of ramping and where we've seen strong growth with profitable unit economics. From a network growth perspective, our priorities here is using our core differentiator, which is the network effects inherent in Cash App to really bring customer engagement out and enable our customers to engage more with their network and with each other. including bringing others from their network into Cash App. And then from a trust perspective, you know, we've evolved relatively quickly from a peer-to-peer app into a financial services app, and trust in our platform is extremely important as customers bring more of their money into the app. And so that's another key focus for us as we drive our inflows framework forward and ultimately as we drive ARPU forward as well.
OpEx
Your next question is from the line of Timothy Chiodo,
Cash App
with Credit Suisse. Your line is open.
spk05
Great. Thank you for taking the question. I want to talk a little bit about cash app customer acquisition costs. So it's taking this back actually to a comment that you made last quarter. You mentioned that CAC was relatively stable versus 2021, which was at the time you had mentioned the $10 blended CAC number. So we were a little bit surprised to hear that simply because you've been moving more towards building density with higher income customers and making the direct deposit push. And we would have expected that to maybe come up a little bit. If you could just talk about what some of the offsets have been, how you've been able to contain those customer acquisition costs, clearly the peer to peer network is a part of it, but maybe some of the other drivers boost after pay. And then broadly to the extent you can, if you could give us an update on gross ads and churn trends for the cash app base overall.
Operator
Hey, Tim, I can kick us off here. Thanks for the question. You know, we've continued to see relative efficiency in terms of our sales and marketing spend here with a cost of acquisition for net new actives in line, continue to be in line with what we saw in 2021, as you note, in that $10 sort of customer acquisition cost range. We are looking to drive new demographics. We are looking to drive higher product adoption at the start with our new customers. and we are looking to bring in higher lifetime value customers, we're seeing some of that play out now in some of the trends that you've seen today, including across the financial services offerings, Cash App Card, and some of those core offerings that have become a bigger part of our product adoption earlier on in the customer's life cycle. We're pairing that with being disciplined in our spend. We're focused on the channels that we have the most confidence in and in driving the greatest returns. and are prepared to be flexible on that moving forward. Ultimately, we think there's a tremendous opportunity from an active perspective to continue our growth here. If you think about digital natives, Gen Z millennial customers, though they make up a significant portion of Cash App customers, we are still only penetrated into 20% of Gen Z millennial customers as of the U.S. population, as we shared at our Investor Day in March. This is the fastest growing demographic for us in monthly actives over the past few years, but there's so much more we can do here to bring the other 80% into Cash App over time too.
OpEx
Your next question is from Michael Ng with Goldman Sachs.
Cash App
Your line is open.
spk03
Great. Thank you very much for the question. I was just wondering if you could expand on the inflows strategy for Cash App. It was really encouraging. to hear the stable inflows per active despite the tough comps and I believe the year-over-year declines in July. So could you talk a little bit about things on the roadmap to drive inflows and direct deposit actives for next year? For instance, are there any meaningful improvements to drive engagement on cash-out taxes for next spring? And then as a quick follow-up, I was just wondering if you could update us on the direct deposit monthly actives number.
OpEx
I think that was one and a half at the beginning of the year. Thank you.
spk15
Sure.
Operator
I'm happy to get started maybe with framing up our inflows framework, and then we'll dive into some of the greater detail on direct deposit. So the inflows framework, again, active inflows proactive monetization rate. You can think of the key drivers of inflows proactive being the spending power of our customers and then our share of wallet of our customers. And so there's sort of two variables for us to think about there, both in terms of the customers that make up the mix of customers on our platform, and then our ability to engage those customers across our products. What we've seen in the third quarter at continued stability and inflows proactive at over $1,000, but growth on a three-year CAGR basis at 17%, which we've seen for most of this year at that growth in the mid-teens, is really encouraging healthy trends across our cash-up customer base across even as we move past those periods of stimulus and tax refunds we think ultimately there's so much more room to grow this inflows proactive number by having multiple inflow channels and cross-selling more of our products to our customers specifically these financial services products like cash up card and direct deposit um and with direct deposit you know as we noted two billion dollars in september of direct deposit volumes those volumes grew by more than 65% year-over-year in September, as we've begun to reduce the friction on account creation after customers sign up for their Cash App card. So this is a key focus for us as we continue with our strategy of enabling or banking products to our customers. Cash App card is a big part of it. Direct deposit, another key part of it. And as a result, direct deposit plus paper money deposit, which is another inflow channel we've opened up, are growing as a share of total inflows, making up more than 14% of inflows in September versus 9% a year ago.
OpEx
Your next question. And in terms of... Sorry, I just wanted to follow up there.
Haley
In terms of the roadmap ahead, A lot of what you saw with what we did over the past year with the navigation is meant to exactly bring more of this to life so that it's even more accessible and easier to find how to turn on direct deposit. For instance, if you get a Cash App card now, you instantly have a direct deposit number. So there's a number of things we can do to optimize for what we're doing in the interface itself so that people are more aware that we have this offering in the first place. And we will continue to add features and products that also coexist with existing ones that people are using. We have to keep in mind that a lot of people in Cash App start with this very simple, I receive money from a friend or a family member, or I want to send money to a friend or family member. And then it's our opportunity to really showcase everything else we have to offer, including the Cash App card, including direct deposit, including cash out taxes. And the easier we make that and the more tips we add in the interface, the more compelling the outcome we will have.
OpEx
Your next question comes from the line of Raina Kumar with UBS.
Cash App
Your line is open.
spk01
Good afternoon. Thanks for taking my question. I'm curious to understand the progress you've made in combining two powerful ecosystems, Cash App Pay and Afterpay. How is organic growth of Cash App Pay trended, and what are the next steps for a full integration here?
Haley
Yeah, so our big focus here is on commerce, and linking our two ecosystems through Afterpay is the most compelling option that we've found in the market. We believe that this is a perfect blend of everything that we can offer to sellers, including a way for them to drive more sales, and also new discovery and new opportunities for customers, which also helps them discover Square merchants and merchants all around the world, especially when you consider online commerce and digital commerce. So our long-term vision is to build a more dynamic checkout experience. which enables a much more fluid checkout than what you see today. We recently introduced the Discover tab in a cache app. See this as a complete start. Our goal here was to introduce people to the concept. We're not there yet with the experience. Think of this as more of a search engine that we're trying to optimize and iterate super fast on to make sure that when people go there, They're looking for something, or we can display relevant content based on their location. And it gets more and more efficient, more effective, and ultimately leads to a purchase. So that is our goal. We're just starting a lot of that work right now. And we intend to make it a place that is instantly relevant over time. And this will take some time. But this will really unlock a lot of what we hope to unlock in both the Cash App ecosystem and the Square ecosystem and be beneficial to our Square sellers, but also more broadly for the Cash App customers as well.
OpEx
Your next question is from Trevor Williams with Jefferies.
Cash App
Your line is open.
spk04
Great. Thanks. Good afternoon. I want to ask a follow-up on margins, particularly in seller or square, just with more of the growth there coming from larger merchants and then international, which I think both are higher CAC. How should we think of the growth versus margin trade-off there if there is one? Is there still more that you need to do to invest behind either of those markets, whether it's the sales force or brand marketing? just trying to get it ultimately what you expect the margin impact to be over time as the mix continues to skew more towards international and larger sellers. Thanks so much.
Operator
Hey Trevor, I can kick off here. So look, our Square business is a fairly high structural margin business as we shared at Investor Day, you know, at a 69% structural margin in 2021. We can think of a significant portion of every dollar of top-line growth drops down to profitability. Where we are orienting our priorities is where we are seeing the strongest returns in terms of our growth, whether it's omni-channel products, moving up market with larger sellers. Our mid-market sellers are now 40% of our GPV, growing at 22% year-over-year, and international, which also growing 40%. And some of the key products that underpin growth with larger sellers, like vertical points of sale, growing at 45% year-over-year. So each of those strategic priorities for our square business that we're investing behind are driving stronger growth in the overall base. Now, we expect in 2023 to moderate the pace of some of our investments across sales and marketing and product development in order to continue to balance that growth and profitability as we spoke about earlier. You know, whether it's across hiring, sales and marketing, where we would be pulling back on some of that brand marketing and have a stable to increasing mix of our investments on things like sales teams as we focus on optimization and as we focus on building with our upmarket sellers, bringing more of those larger sellers onto our platform, as well as our product development investments, where we are Really, you know, expanding the reach of our platform and the cohesiveness of our platform so we can take the work off our seller's plates and focus on some of the key products that are truly resonating. As you hear today, the vertical solutions, the developer platform, our omni-channel software. So those are some of the key focus areas for us. Of course, you know, we want to remain agile with our spend and be responsive to what we see in a potentially changing macro environment. but we are seeing traction in the areas where we are most strategically oriented.
OpEx
Your next question is from the line of Josh Beck with KeyBank. Your line is open. Thanks for taking the question.
Josh Beck
I have an extra follow-up along those lines as well for the Square Cellar business. Obviously, you made a pretty substantial contribution investment last year in outbound sales. You've obviously had more time to see the payback and obviously blend that with the other go-to-market strategies. So as you look forward to 23, based on the lessons that you've learned, how important is that outbound motion within the square go-to-market?
spk15
Hey, Josh, happy to double-click on this.
Operator
And maybe I'll address more broadly our go-to-market approach for the Square business. So our focus, maintaining target paybacks of about a six-quarter payback and target returns of about 3x ROI as we evolve our go-to-market strategy to support the growth up market. Throughout 2022, we've pulled back on some of the lower ROI areas and recalibrated our spending mix to the channels with more proven ROIs. So what does that look like across each of the areas? From a sales perspective, we're focused on optimizing our sales channel, which with more predictable returns and where we have the ability to measure performance, we believe our sales team will ultimately be a long-term core engine of growth for the business. And there's kind of three key strategies for enhancing our growth upmarket using our sales team. One is the verticalization of the team. So creating pods around specific verticals, you know, retail restaurant services where you see we're gaining traction with our vertical points of sale today to enable those account executives to go deeper in the needs that are specific to each of those verticals. Second, expanding our outbound sourcing capabilities so that we can reach out and make sure that these larger sellers have a better understanding of all the many things that Square can do for them today. And then third, introducing more automation into our tooling to enable our sales team to have better information as they're reaching out to these sellers, which ultimately then can help drive greater efficiency. From an international perspective, our four most tenured international markets are pacing at these healthy payback periods that we're targeting. Our three more recently launched markets in the last 18 months do have longer payback periods. whether we're looking at marketing or sales as we're introducing our ecosystem into those markets and building our awareness. From a performance marketing perspective, this is really the core engine which continues to drive stable proven returns and historically has been a significant driver of acquisition. So that's really giving you an orientation of our overall go-to-market efforts.
spk15
Sales is a key piece of that.
OpEx
Your next question is from Ramsey Ellisall with Barclays.
Cash App
Your line is open.
spk10
Hi, thank you so much for taking my question tonight. I wanted to ask about vertical solutions and whether there is a long-term roadmap to expand the number of verticals that you support. And then separately, I just wanted to ask Amrita about the potential to maybe more actively leverage the customer account balances to drive more float income. It looks like you guys used to keep more Cash, more funds in the money market versus sitting in cash. I'm just curious if that's something that we could see more of in the future to drive some interest income. Thanks.
Haley
So, yeah, our three vertical point of sales right now and services are Square for Restaurant, Square for Retail, and appointments. We're always looking for opportunities to first and foremost expand these and add more features, add more services to each one. to continue to make sure that we're serving the need for the particular service, but also looking for other opportunities for more vertical services. But first and foremost, it's making sure that we remain competitive and we're ahead in terms of our feature set, and making sure that we're continuing to work to optimize these services for our customers. The other thing that we've talked about in the past on these calls is one trend we continue to see is that the vertical aspects of these things tend to blur a little bit. We see restaurants adding retail-like services and appointment-type businesses adding or merging with restaurant-type services or retail as well. So the benefit of our ecosystem is we're not focused on just one. We're focused on all three and more generally how you operate a business, how you operate a team, and ensuring that we're giving you tools no matter what business you choose to be in to make the sale and make more sales ultimately. So that is our goal every day, answering the question, how do we help sellers make more sales? And in some cases, these vertical efforts make more sense. But the most compelling trend that we continue to see is the blending of all these things, and that's where our ecosystem mindset really shows a strength.
Operator
And, Ramzi, just to follow up on your question on float or interest income, you know, the majority of our cash in our customer funds is variable to interest rate fluctuations via pretty diversified portfolio of accounts, the vast majority of which are relatively short-term. which allows us to capitalize on increases in yields. So in the third quarter, interest income increased as a result of obviously higher interest rates, and we expect to continue to benefit as many of our investments lag on interest income pickup. Just to maybe break that down for you across our corporate balance sheet and customer funds, from a corporate balance sheet standpoint, interest income was $15 million in the third quarter. That's up from $9 million in the second, $8 million in the first. Majority of our cash here is variable, as I said, to interest rate fluctuations, either via fixed income, T-bills, government money market accounts, or non-interest bearing accounts that earn an earnings credit rate. And much of this interest income flows through to the interest income and expense line, which is below the EBITDA line. From a customer fund standpoint, cash-out customer funds does generate interest income as well. We had $7 million in the third quarter, up from less than a million in each of the first and second quarters. Majority of these funds are invested in very short-term accounts or money market accounts, and they flow through cash-out revenue and gross profit lines.
OpEx
Your final question comes from the line of Andrew Jeffrey with Truist Securities.
Cash App
Your line is open.
spk06
Hi, good afternoon. Appreciate you squeezing me in here toward the end. I wanted to ask about the Square business and the competitive environment and how much of the growth is coming from competitive takeaways who are the companies that you generally see at the point of sale? How much is a net new business creation? Just trying to get a sense of kind of the way the market's evolving competitively and how you think you're positioned.
Operator
Andrew, maybe I can kick us off here. Um, you know, what we see is, is stability in our trend lines. Um, You know, it'll depend on each product as to who our competitors are. We don't see a competitor out there who has the breadth that we have across our ecosystem. And really, it's that diversity of products, verticals, channels, and customer types that we have that we believe is the most resilient, particularly as we may be entering a volatile time from a macro perspective. So what we saw in the Square ecosystem through October was relative stability from Q3 into October or into Q4 with GPV through October in the U.S., and particularly for some of those discretionary verticals, which we're paying particularly close attention to, you know, retail, restaurants, services on a three-year CAGR basis with stability. Now, of course, from an international perspective, you know, we don't see this as a necessarily competitive issue, but from a FX perspective, we're seeing some headwinds there, as are many other companies, and from a macro perspective, as we noted in the UK. But more broadly, when you look at the Square ecosystem, XPPP, as we noted, which is a non-recurring benefit, you know, in Q4, and XBNPL, we see stable rates of year-over-year growth and square gross profit from Q3 into Q4. And again, you know, from a competitive perspective, we believe we're fairly differentiated given the diversity of customer types and product types that we serve.
Haley
Yeah, I would say that generally, you know, there's certainly areas across our verticals or across some of our products where we're behind competition and somewhere we're ahead. But on the net, I think, as Amrita said, we're much further ahead over the long term because of that ecosystem mindset and because of the breadth of the tools that we offer. And most importantly, how easily they integrate together. It's literally a button push to turn things on or off. And that includes a wide array of services from lending to customer relationship management to vertical points of sale to hardware. So this is where I think things really matter is a business no longer has to go vendor to vendor to vendor, but they can come to one place, they can come to Square, and they see pretty much everything they need. It does mean that we are going to be slightly slower in rolling out all the features for each one particular vertical. But it also balances that with a much higher quality of integration, which ultimately gives a whole ton of time back to the seller so that we see much, much better retention than a lot of our peers.
OpEx
At this time, I'd like to turn the call back to the company for closing remarks.
spk11
Thank you for joining. That concludes our call. We will see you for our fourth quarter 2022 earnings call on February 23rd. You can now disconnect.
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