Shares in Square rose as much as 7% on Tuesday after the company officially began its banking operations this week.
Square’s new full bank will offer FDIC-insured deposit accounts and loans to small businesses that the company has previously used for payment processing.
Salt Financial City, Square Financial Services, said Monday that it will initially focus on offering business loan and deposit products, starting with the underwriting and original business loan for Square Capital’s existing loan product.
Prior to the launch, Square Capital loans were issued through a partnership with Celtic Bank.
“By making banking capacity work internally, we can function faster, which will serve Square and our customers as we continue to create financial instruments that serve the subordinates,” Square Chief Financial Officer Amrita Ahuja said in a statement.
The company has been working on launching a bank for more than four years, and Square approved last March. “We do not expect the bank to have a material impact on Square’s consolidated balance sheet, total net income, gross profit or adjusted EBITDA by 2021,” the company said.
Although for the time being it’s only on the retailers’ side, Square CEO Jack Dorsey points to the broader ambition of making the tech company a one-stop shop for finance. Square also has a record of building fast-growing products internally. Cash App, which started as a smaller internal project, now accounts for about half of Square’s gross profit.
Square’s move has paved the way for other fintechs who want to cut out the middleman in banking. Fintech company Sofi applied for a national banking charter last year. But the version that Square put together – an industrial lending charter, or ILC – has historically fallen back on banking lobbyists. The industry has criticized it as a way for companies to embellish rules that have historically separated banking and commerce.
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