Shares of Square jumped as much as 7% Tuesday after the company officially launched its banking operations this week.
Square’s new, wholly owned bank will offer FDIC-insured deposit accounts and loans to small businesses that have historically used the company for payment processing.
Square Financial Services, headquartered in Salt Lake City, will initially focus on offering business loan and deposit products, beginning with underwriting and originating business loans for Square Capital’s existing lending product, the company said Monday afternoon.
Before its launch, Square Capital loans were issued through a partnership with Celtic Bank.
“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’s CFO Amrita Ahuja said in a statement.
The company had been working on launching a bank for more than four years, and Square received regulatory approval last March. 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 net revenue, gross profit, or Adjusted EBITDA in 2021,” the company said.
While it’s only on the merchant side for now, it signals CEO Jack Dorsey’s broader ambition in making the tech company a one-stop shop for money.
Square has also paved the way for other fintechs that may want to cut out the middleman in banking. Fintech company Sofi also applied for a national bank charter.
