In the midst of the novel coronavirus pandemic, fintech company Square, which owns the mobile-friendly investing and peer-to-peer payment platform Cash App, has quietly received approval of its FDIC application. The regulatory green light means Square can proceed with banking services, under the banner of Square Financial Services, including originating commercial loans to merchants that process card transactions through the company’s payment systems, according to an announcement by the Federal Deposit Insurance Corporation.
The approval is one of the surest signs yet that banking and wealth management are moving closer together, fused under the pressure of technological efficiency, even while other firms, like Envestnet, create interfaces for keeping wealth management professionals and bankers at arm’s length.
Cash App, owned by Square, was originally launched in 2013 to compete with PayPal’s Venmo peer-to-peer payment app, as well as Apple Pay and Google Pay. Last year Square announced Cash App Investing, a free, self-directed trading feature that supports both whole and fractional share investments.
Meanwhile, Square’s noninvesting side continues to work with merchants as a payment processing system provider. The firm's bank approval by the FDIC means it can originate loans to merchants, as Square Financial Services, pending approval from the Utah Department of Financial Institutions.
Square Financial Services will be led by Lewis Goodwin, CEO, and Brandon Soto, CFO, in the bank’s Salt Lake City headquarters. The bank "expects to continue to sell loans to third-party investors and limit balance sheet exposure," according to an announcement by the firm. The bank is expected to launch next year and its primary purpose will be providing small business loans and deposit products.