Sq. inventory jumps after Jack Dorsey’s firm units up its personal financial institution
Square’s shares rose up to 7% on Tuesday after the company officially started banking this week.
Square’s new wholly owned bank will offer FDIC-insured deposit accounts and loans to small businesses who have used the company in the past to process payments.
Square Financial Services, headquartered in Salt Lake City, will initially focus on offering business loan and deposit products, beginning with the underwriting and lending of business loans for Square Capital’s existing loan product, the company announced on Monday afternoon.
Prior to its launch, Square Capital loans were made through a partnership with Celtic Bank.
“By integrating bankability internally, we can act faster, which will benefit Square and our customers as we continue to work to create financial instruments that serve the underserved,” said Amrita Ahuja, Square’s CFO, in a statement.
The company had spent more than four years starting a bank, and Square received regulatory approval in March last year. Square said it will take time for its banking operations to have a material impact on its near-term financial results.
“We do not expect the bank to have a material impact on Square’s consolidated balance sheet, total revenue, gross profit or Adjusted EBITDA in 2021,” the company said.
While this is currently only happening on the merchant side, the move signals Square CEO Jack Dorsey’s broader ambition to turn the tech company into a one-stop finance shop. Square can also look back on many years of experience in building fast-growing products internally. The Cash app, which started as a smaller in-house project, now accounts for roughly half of Square’s gross profit.
Square’s move paved the way for other fintechs looking to shut down the middleman in banking. The fintech company Sofi applied for a national bank charter last year. But the version Square went on – an industrial loan charter, or ILC – has been pushed back by banking lobbyists in the past. The industry has criticized it as a way for companies to bypass rules that have historically separated banking and commerce.
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