Square has been around since Breaking Bad left fans craving more of Bryan Cranston. The company has impacted payments and banking, from the creation in 2010 of its novel “dongle” — an inch-square card reader businesses can plug right into their phone to accept payments — to the rollout of its Cash App person-to-person payment service. Cash App now has more than 30 million monthly active users, according to Motley Fool.
Yet, Square isn’t satisfied. Among its strides to offer suites of banking services to small and midsize business (SMB) clients, it appears the company has been quietly preparing to give these customers the next big piece of the pie: checking and savings accounts.
Square has yet to announce it officially, so no one knows for sure when the fintech’s banking accounts will be hitting the streets, but based on an unexpected insight from an iOS developer, the company could turn it on with the flip of a switch. As Bloomberg reported, the developer dove into the code of Square’s iOS app and uncovered key details of the company’s banking plans.
The leak comes on the heels of the fintech’s banking subsidiary — Square Financial Services (SFS) — being approved for an Industrial Loan Charter in March 2021, a year after it first gained FDIC conditional approval.
‘Old Dog’ With a Big New Trick:
Square, around for over a decade, just acquired a banking charter in March 2021. It appears to already have the code set up to roll out checking and savings accounts.
How Square’s Business Checking Plans Could Impact Banking
By receiving final approval for its industrial bank license from the FDIC and the Utah Department of Financial Institutions, the payments company will be able to offer deposit products and originate its own loans instead of relying on its bank partner — 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 CFO Amrita Ahuja said in a statement.
And that’s not all. Square might be able to capsize the strategies of traditional banking providers who rely on the profitability of small business checking accounts. According to hints in the code, it seems the company plans to do away with monthly service charges and any fees associated with overdrafts and minimum balances on the business accounts.
It also looks like Square intends to offer a 0.5% interest rate for its business savings account, once it’s announced.
Strike to the Nerve:
Square, when it announces the new offerings, looks like it plans to cut most conventional business account fees. This could sharply impact traditional providers’ SMB business.
If Square is indeed looking to slate in checking and savings accounts to its index of services, it could “broaden its ecosystem” and help the company truly distinguish itself amongst the onslaught of fintechs, according to a new report by Insider Intelligence. And it will complement what the payments processing company already has in place.
Insider Intelligence argues that the strategic move would put Square smack dab at the forefront of the market.
“Few competitors offer these [banking] features, though firms like Brex are on its heels, and those that do are approaching them through partnerships rather than by building proprietary services, which might give Square more control over its product,” says Jaime Toplin, writer of the report.
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Storming the Market
Square is well known for its business payment innovations. Whereas the payment infrastructure used to require coping with dense, multi-page contracts, as Bloomberg noted, Square transformed what it meant for businesses to sell products and services.
The company didn’t stop there — Square has since rolled out numerous new hardware and software tools to satisfy its catalog of small businesses.
Take for instance, the company’s “Seller” ecosystem, which encompasses the Square Capital lending platform, a debit card for small businesses, appointment and payroll amenities and various other tools. It’s been a success — in its 2020 annual report, Square reported its point-of-sale ecosystem had over 210 million consumer profiles and nearly 295 million items were listed by sellers on Square.
Square has also targeted the consumer side of the market, offering P2P products through its “Cash App,” which — as mentioned — has attracted millions of users. In the first quarter of 2021 alone, Square boasted over 10 million monthly active users of its Cash Card (connected to the Cash App) and reported that seven million people used the card weekly on average in March.
The Cash App includes a variety of services for consumers, such as bitcoin and stock investments, in addition to the cash card. The new industrial bank charter could be used to further reach into the consumer market.
In its fight to be ahead of the curve, Square has inspired transformational movements, pushing leading fintechs like PayPal — and even megabanks like Chase — to up their game.