Square Financial Services Begins Banking Operations

Square, the financial payments firm run by Jack Dorsey, launched an in-house bank that it says will allow it to “operate more nimbly” in an increasingly crowded fintech market. Square Financial Services will be an industrial bank, meaning it will offer limited financial services. That also resulted in shares of Square jumping as much as 7% Tuesday after the company officially launched its banking operations this week. The company’s stock closed up 4.6%.

The firm recently announced that the bank has begun operations after completing the charter approval process with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions. It will operate as an independently governed subsidiary of Square Inc. Dorsey is also the CEO and co-founder of Twitter.

The Salt Lake City, Utah-based Square Financial Services will provide business loans and deposit products to sellers who use its card reader and other point-of-sale services. The fintech industry has gotten a boost during the pandemic as consumers and companies shift toward touchless or remote financial transactions.

Although fintech firms are increasingly offering products and services traditionally provided by banks, it’s still rare for technology companies to get bank charters. In most cases, fintech partners with third-party banks to service products such as small-business loans. Running its own bank will allow Square 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 Inc. Chief Financial Officer Amrita Ahuja said in a statement. Square’s stock closed up nearly 5% Tuesday.