That little square used for swiping bank cards at the tip of smartphones is looking to increase its reach with Square Financial Services, entering the traditional banking industry. This, after startup competitor Robinhood recently attempted something similar only to be smacked down by regulators and banking cartels. It’s actually the second time Square, owned by Twitter’s Jack Dorsey, is formally applying for what’s known as “an industrial loan company charter.” If approved, it would manage deposits with federal insurance, and it could be a way to reach the much desired, growing younger-person market.
Second Time Might be a Charm for Square
Kate Rooney of CNBC reports Square is once again attempting to enter the legacy banking sector. “Approval of the plan would allow the payments company to operate without going through outside banks and intermediaries,” Rooney explained. “If approved, Square would also get access to a coveted feature of the banking world — deposit insurance.”
The application is through FDIC, the Federal Deposit Insurance Corp., an agency in the US said to back each personal bank account up to $250,000. Square is seeking “a special industrial loan” license which would secure government insurance of the FDIC sort.
It’s the second time for Square, having yanked its first try Summer of this year over the kinds of concerns recently thrown at Robinhood, a competitor, after it recently attempted a more traditional banking launch apparently without prior regulator approval (they’ve since backed down).
The company has made a real path for smaller, more nimble credit card processors, and what such a model can accomplish. Recently named Yahoo! Finance’s Company of the Year, it embraced bitcoin as a currency alternative on its Cash App platform. Dorsey himself has been a big public booster of crypto. The company also recently toe-dipped into the banking sector with its Square Capital small business loans.
Square Capital released a statement this week, insisting it “is uniquely positioned to build a bridge between the financial system and the underserved, creating access for small businesses to both capital and the economy. We will continue to work closely with the FDIC and Utah DFI as they review our applications for Square Financial Services.”
Clearly, the younger set does not wish to visit brick and mortar banks, stand in lines, and deal with traditional frictions. It appears the first company to offer services, comprehensive, to younger account holders might dominate such a future market. Suggesting in corporate speak Square would “lean into” banking services, Dorsey noted of Square’s ubiquity, “They store money with us, it’s accepted anywhere Visa is accepted. They can send and receive money from friends and family.”
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