Who Will Run Square’s Bank Unit?
$1 trillion alternative financing market
Square (SQ) is stepping up its game against PayPal (PYPL), Amazon (AMZN), and LendingClub (LC) in the alternative financing market. The company has applied for a license to operate an industrial bank, which will be called Square Financial Services (or SFS).
SFS, to be capitalized with $56 million in cash, will provide credit and offer deposit account services to merchants. The Polsky Center estimates that US (SPY) alternative loan volume rose to $34.5 billion in 2016 from $28.3 billion in 2015. Globally, the alternative financing market is forecast to grow to $1.0 trillion in the coming decade.
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Former Yahoo executive to be chair of SFS
The chart above illustrates the growth of the US alternative lending market between 2015 and 2016. If regulators give their consent, Square’s bank unit, SFS, will be run by company insiders. Jacqueline Reses, who leads Square’s existing credit arm, Square Capital, will be the chair of SFS. Reses joined Square in 2015 from Yahoo just before Yahoo completed its sale to Verizon (VZ).
Square Capital has grown impressively under Reses. From a quarterly loan volume of $85 million in 2Q15, Square Capital’s loan volume reached $318 million in 2Q17, implying 68% year-over-year growth.
Former Green Dot chief to head SFS
Square’s bank CEO will be Lewis Goodwin, an executive who recently joined the company from Green Dot (GDOT). Goodwin was CEO and president of Green Dot for several years.
Green Dot is a provider of prepaid debit card services. In 2016, Goodwin’s last full year as the company’s head, Green Dot’s revenue grew to $718.8 million from $694.7 million in the prior year.