Payments platform Square launched its banking division Square Financial Services yesterday, headquartered in Utah. The company received conditional approval from the FDIC in March 2020, including the proviso that the bank would be established within a year.
Square's existing credit service:
Square said the new division will begin by offering loans through its already existing Square Capital product, which provides credit services for businesses using Square payment service. Square Capital currently offers loans through Celtic Bank. Since 2014, Square Capital has offered 1.2 million advances amounting to $8.1B, including $857M through the Payroll Protection Program.
Platform companies recently started offering credit lines to their network of sellers to capitalize on their reach and the availability of merchant transaction data. In September last year, Walmart announced that it would offer credit lines for its third-party marketplace sellers by partnering with Goldman Sachs' Marcus division. Shopify, Amazon, and Alibaba also offer similar services.
As fintech begins to offer banking products, JPMorgan launched its free QuickAccept service last October, which will enable businesses to take card payments within minutes through a mobile app or a contactless card reader. The service is pitted against companies like Square, which primarily offers Point-Of-Sale service.
Square currently has a market cap of $116B, more than Goldman Sachs' $114B; PayPal's $319B market cap is higher than almost all U.S. banks, only behind JPMorgan Chase.
A version of this story first appeared in Inside Business. You can read the full issue here.