(Reuters) - Payments firm Block's shares fell 8% in premarket trading on Friday as a slowdown in spending growth fueled investor concerns, turning the spotlight to its bet on buy-now, pay-later lending to drive profits in 2025.

Consumer spending growth has remained muted as Americans grapple with trade policy uncertainty under the new Trump administration and persistently high interest rates, despite support from a strong labor market and steady wage growth.

Block's Cash App business, which enables peer-to-peer mobile payments, reported gross profit growth of about 16% in the holiday quarter, down from 25% a year earlier.

The digital payment space has become fiercely competitive, with tech giants including Apple ( AAPL ) and Google expanding their presence and industry heavyweights like PayPal ( PYPL ) broadening offerings to retain cautious customers.

"The long-term economics of this (Cash App) business remain the biggest point of uncertainty," said Brett Horn, senior equity analyst at Morningstar, noting that its growth trajectory is "still in question."

Meanwhile, Block's business-focused Square unit reported gross profit growth of 12% in the quarter, versus 18% a year earlier.

'NOW OR NEVER' YEAR

Block expects gross profit to grow by at least 15% year-over-year in 2025, with margins expanding by around 240 basis points.

Analysts view BNPL expansion as a key growth driver for Block, with Jefferies calling 2025 a "now or never" year for the company.

The BNPL market is projected to surpass $160 billion by 2032, with retailers including Walmart, Target and Amazon, joining fintech players like Block and PayPal ( PYPL ) in offering the service to attract younger, credit-averse shoppers.

With its quick approval process, easy access, and a revenue model based on fees, BNPL is an attractive proposition for fintech while traditional banks have been constrained by stricter regulations, higher risk assessment standards, and a reliance on interest-based credit products.