Square resubmits request for bank license
Given where Square (SQ) began, as a provider of payment card readers suited mostly for small businesses, the company’s business has broadened a great deal. The company has expanded into money transfers through its Cash App product, bitcoin trading, and lending to businesses and consumers. And Square continues to dream big: it wants to start a bank. As the Wall Street Journal reported recently, Square has revived its request for permission to open an industrial bank. Square Financial Services, the proposed name of the bank, would offer banking services such as loans and deposit accounts aimed at small businesses. But it won’t open physical branches.
Small banks opposed to the idea of Square running a bank
Square initially applied for a bank license in September last year. But it withdrew the application earlier this year, promising to resubmit it at a later date, as American Banker reported. Now it has done it, showing the company will pursue its dream even amid opposition. Lobbyists for small banks are opposed to the idea of technology companies like Square being granted bank licenses, according to the Wall Street Journal’s report.
Square has extended $3.5 billion in business loans
Operating a bank would broaden Square’s participation in the financial services sector and potentially help it boost its customer retention at a time when it is in tight competition with PayPal (PYPL) and others for consumer and business customers. In the third quarter, the company extended $405 million in loans to over 62,000 small businesses. Since venturing into the credit business in 2014, Square has written more than $3.5 billion in small business loans. PayPal has extended more than $6.0 billion in small business loans since 2013. Amazon (AMZN) and Shopify (SHOP) also lend to their marketplace sellers, mostly as a way to help sellers grow their businesses and make them loyal to their platforms. In July, Square won a contract to extend loans to eBay (EBAY) sellers.
Square’s revenue rose 51% year-over-year to $882 million in the third quarter.