Square, Inc. (SQ - Free Report) received conditional approval to operate a bank from the Federal Deposit Insurance Corporation (FDIC) Board.
Following this approval, the company is aiming to launch Square Financial Services as a bank by 2021. Square Financial Services will be headquartered in Salt Lake City, UT and operate as a direct subsidiary of Square.
The bank will run via Industrial Loan Charter (ILC), which enables the non-traditional financial institutions to accept government insured deposits. Notably, the company has received charter approval from the Utah Department of Financial Institutions.
The company will be primarily offering deposit products and small business loans for Square Capital’s commercial lending business.
The latest achievement bodes well for the company’s strengthening efforts to rapidly penetrate the banking sector.
Square’s Aggressive Stance
We note that Square is focused aggressively on hiring additional people to expand its Salt Lake City bank headquarters.
Further, the bank’s executive team will be led by Square Financial Services’ CEO Lewis Goodwin and Chief Financial Officer Brandon Soto. Both of them are extremely experienced in the field of banking.
Square aims at helping the small and underserved businesses through Square Financial Services bank.
Apart from the latest move, Square offers same day deposit service via Square Deposits, which provides options for deposit speed – same day, instant, and one-to-two business day.
We believe Square’s strong banking initiatives and robust deposit services portfolio are likely to bring significant disruption in the banking sector, which does not bode well for the traditional banks.
Square Ups the Banking Game
With the latest FDIC approval, Square intensifies competition amid technology companies, which are trying to capitalize on the growing proliferation of fintech applications among banking customers.
PayPal (PYPL - Free Report) , one of the biggest competitors of Square, also offers quick bank transfer service. Its Instant Transfer to bank allows U.S. customers to transfer money to their bank accounts within 30 minutes at the cost of one percent of the total transaction.
Further, the company is leveraging its partnership with JPMorgan Chase to transfer funds to banks seamlessly.
Additionally, companies like Alphabet’s (GOOGL - Free Report) Google, Amazon (AMZN - Free Report) and Facebook are leveraging the power of artificial intelligence (AI), machine learning (ML), augmented reality (AR)/virtual reality (VR), data analytics and cloud technologies to make advances in this particular sector, in turn intensifying the battle.
Further, the massive database stored on each of the above-mentioned companies’ platform provides them useful insight into consumer behavior, spending and saving pattern, and most importantly their preferences regarding financial services. This remains crucial in customer data analysis in the banking space.
Nevertheless, growing momentum of Square in the online payment space and its remarkable achievement are likely to help it in gaining a competitive edge against these companies.
Currently, Square carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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