Shares of Square are up a whopping 7% on Tuesday after the company officially launched its banking operations this week.
Square’s new full-blown bank will offer FDIC-insured deposits and loans to small businesses that have used the company in the past for processing payments.
Salt Lake City-based Square Financial Services said Monday it will initially focus on offering business loan and deposit products, starting with acquiring and providing business loans for Square Capital’s existing credit product.
Prior to launch, Square Capital loans were provided through a partnership with Celtic Bank.
“Bringing the banking capacity in-house will allow us to be more agile, which will serve Square and our customers as we continue the work to create financial tools that serve the less fortunate,” said Amrita Ahuja, Square’s CFO, in a statement. statement.
The company had been working on launching a bank for more than four years, and Square received regulatory approval 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 in 2021,” the company said.
While it’s only down to the merchants for now, the move hints at Square CEO Jack Dorsey’s broader ambition to make the tech company a one-stop-shop for finance. Square also has a track record of building high-growth products in-house. Cash App, which started as a smaller in-house project, now makes up about half of Square’s gross profit.
Square’s move paved the way for other fintechs who may want to take out the banking middleman. Fintech company Sofi applied for a charter from the national bank last year. But the version Square went with – an industrial loan charter, or ILC – has historically met with contradiction from bank lobbyists. The industry has criticized it as a way for companies to get around rules that have historically separated banking and commerce.
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