It’s just a little business banking between friends for now. But the announcement this week that SME payments platform Square is launching an in-house bank is the latest instance of fintechs leveraging banking services to maximize customer engagement and grow their customer base.
Square Financial Services, based in Salt Lake City, Utah, began operations at the beginning of the week, and will function as an independently governed subsidiary of Square offering business loans and deposit products for its merchant sellers. Previously leveraging a partnership with a third-party bank to offer financing via its Square Capital solution, the new “industrial bank” will now provide underwriting and loan origination for the company’s lending product.
According to Square, its Square Capital division facilitated 57,000 loans in Q4 of 2020 and facilitated $857 million in Paycheck Protection Program (PPP) loans to 80,000+ SMEs. Additionally, 58% of Square Capital’s loans go to women-owned businesses, with 35% going to ethnic minority-owned firms. These figures compare favorably to those of traditional lenders, whose financing tends to support female-owned SMEs 17% of the time and minority-owned companies 27% of the time.
“Bringing banking capability in-house enables us to operate more nimbly, which will serve Square and our customers as we continue the work to create financial tools that serve the underserved,” Square Chief Financial Officer Amrita Ahuja said. Ahuja, who is also Executive Chairwoman of the board of directors for Square Financial Services, added, “We thank the FDIC and Utah DFI for their partnership enabling us to reach this milestone, and look forward to continuing to expand access to financial services at this critical time for small businesses.”
Square Financial Services won charter approval with both the FDIC and the Utah Department of Financial Institutions. The entity will be led by CEO Lewis Goodwin, with Brandon Soto serving as Chief Financial Officer and Samantha Ku as Chief Operating Officer.
Photo by Uri Espinosa from Pexels
The post Square Launches Business Bank appeared first on Finovate.
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