Square just got approval to open a bank, and is planning to do it in 2021.
In a press release Square said the Federal Deposit Insurance Corp. voted to conditionally approve Square’s application and that it received charter approval from Utah Department of Financial Institutions. Square is aiming to launch a bank in 2021 called Square Financial Services. The bank will operate independently, as a direct subsidiary of Square, Inc.
Square is led by Silicon Valley mogul Jack Dorsey. Profits related to bitcoin made up half of Square’s Cash App revenue in the fourth quarter 2019, and the company is active in the crypto venture capital space
The bank’s primary business will be deposit products and small business loans for its commercial lending business. The main purpose of the bank is to provide loans and deposit products for small businesses. Square is among the fintechs that are looking to branch into banking as they diversify their revenue stream and bring new services to their existing customers. Small businesses have long been ignored by traditional banks and are prime targets for the nation’s fintechs including Square.
Square is the second fintech to gain a banking charter from the Federal government in recent weeks. Varo Money gained approval by the FDIC. in February. Meanwhile, in the same month LendingClub, a trailblazer in online lending, made its first fintech acquisition, spending $185 million in cash and stock to acquire Radius Bancorp. Through the acquisition, LendingClub gets access to Radius Bank, the popular digital bank operating in the U.S. with about $1.4 billion in assets. LendingClub is the first fintech company to buy its way into banking, eschewing the process of applying for a national bank charter.