Square shares rose to 7% on Tuesday after the company officially launched its banking operations this week.
The new Square bank, wholly owned, will provide FDIC-secured deposit accounts and loans to small businesses that have historically used the company to process payments.
Salt Lake City-based Square Financial Services said Monday it will initially focus on providing business loan and deposit products, beginning with the underwriting and origination of business loans for Square Capital’s existing lending product.
Prior to launch, Square Capital loans were issued through a partnership with Celtic Bank.
“The internal bringing of banking capacity allows us to operate more skillfully, which will serve Square and our customers as we continue to work to create financial instruments to serve disadvantaged people,” said Square Chief Financial Officer Amrita Ahuja. a statement.
The company has been working on launching a bank for more than four years, and Square received regulatory approval in March last year. “We do not expect the bank to have a significant impact on Square’s consolidated balance sheet, total net income, gross profit or adjusted EBITDA in 2021,” the company said.
Although it is only on the side of the retailer for the time being, the move signals Square CEO Dor Dorsey’s broader ambition to make the technology company a one-stop shop for finance. Square also has a track record of building fast-growing products domestically. The Cash App, which started as a smaller internal project, now accounts for about half of Square’s gross profit.
Square’s move paved the way for other fintechs that might want to eliminate the banking intermediary. Last year, Fintech Sofi applied for a charter for national banks. But the version with which Square went – an industrial loan card or ILC – has historically hit back at the bank’s lobbyists. The industry has criticized it as a way for companies to outline rules that have separated banking and trade history.
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