26 September 2017
visit www.avoka.com

Square applies for bank status

07 September 2017  |  16935 views  |  4 digital banking

Square, the fintech startup headed by Twitter founder Jack Dorsey, has made an official application in the US for a banking license, ending months of speculation about its plans but also reigniting the argument about the use of industrial loans charters (ILCs).

These charters, also known as industrial bank charters, give companies permission to carry out banking services but also enables them to continue providing other non-financial commercial services. In theory Square, which applied for an ILC rather than a traditional banking license, will be able to continue to operate its food delivery business Caviar as well as the provision of its payment terminals.

In contrast, traditional bank holding companies are prohibited from any activity unrelated to financial services. Unsurprisingly banks have complained that this gives challengers seeking an ILC an unfair advantage while others have voiced concern that an ILC places too much commercial power in the hands of a single organisation.

ILCs were subject to a moratorium during the passing of the Dodd Frank Act but this was lifted in 2014. Since then retailer WalMart unsuccessfully applied for an ILC and then earlier this year online lending startup SoFi applied for an ILC. The application is still pending but if successful it would be the first award of an ILC for more than a decade.

The move, first reported by American Banker, would also potentially pave the way for Square to assume banking status. According to a Square spokesperson, the new bank will offer loans to small businesses, similar to its lending service Square Capital which is a partnership with Celtic Bank, as well as some deposit services. ILC status would enable Square to continue lending but without the reliance on a banking partner such as Celtic Bank. According to Dorsey, Square has to date lent more than $1.8 billion to over 140,000 businesses, with an average loan size of $6,000.

Comments: (4)

Hitesh Thakkar
Hitesh Thakkar - FIS Payments Software and Services India - India | 07 September, 2017, 14:06

One Request to Finextra editorail team to run Spell check before posting it.

It's going to be uphill climb for Square with ILC filling as WalMart and SoFi has it's own entry barriers, existing merchant base can be plus for the applicant...need to wait and watch.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Gerard Hergenroeder
Gerard Hergenroeder - Payments Shark - Millersvile | 07 September, 2017, 14:33

This makes a lot of sense to me. It will enable them to grow core banking activities which will be more profitable than just payments acceptance.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 07 September, 2017, 14:55

"editorail"? I've heard of MonoRail, EuRail, etc. but what's EditoRail?

Spell check may be equally useful for Finextra Commenters:)

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Roger G LeBlond
Roger G LeBlond - Roger G Leblond - Corpus Christi | 07 September, 2017, 16:38 Remember Bankers, you are not the best competitors in the world. Stay on your toes. Banks cannot lose competition to an Organization that has a better delivery process that includes a better payment process.
Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Atom Bank targets German retail savings market

Atom Bank targets German retail savings market

06 September 2017  |  6653 views  |  0 comments | 14 tweets | 12 linkedin
Square stock rises on bigger deals

Square stock rises on bigger deals

03 August 2017  |  9196 views  |  1 comments | 1 tweets | 1 linkedin
Online lender SoFi applies for bank charter

Online lender SoFi applies for bank charter

14 June 2017  |  4046 views  |  0 comments | 2 tweets | 4 linkedin
Square Virtual Terminal lands in the UK

Square Virtual Terminal lands in the UK

31 May 2017  |  8002 views  |  0 comments | 6 tweets | 7 linkedin
Square arrives in the UK

Square arrives in the UK

28 March 2017  |  6735 views  |  0 comments | 14 tweets | 14 linkedin
Fintech startups bedding deeper into the banking value chain - McKinsey

Fintech startups bedding deeper into the banking value chain - McKinsey

15 November 2016  |  21674 views  |  0 comments | 53 tweets | 47 linkedin
Atom Bank opens doors to all UK customers

Atom Bank opens doors to all UK customers

06 October 2016  |  12496 views  |  0 comments | 31 tweets | 36 linkedin
Square launches payroll service

Square launches payroll service

01 July 2015  |  5659 views  |  0 comments | 4 tweets | 3 linkedin
Square begins mass-market roll out

Square begins mass-market roll out

10 November 2010  |  13027 views  |  4 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.vasco.comvisit www.temenos.comdownload the paper now

Top topics

Most viewed Most shared
AXA launches blockchain to cover late flight compensationAXA launches blockchain to cover late flig...
11629 views comments | 16 tweets | 30 linkedin
SBI Ripple Asia advances on South KoreaSBI Ripple Asia advances on South Korea
9231 views comments | 16 tweets | 1 linkedin
European Commission makes fintech a priority in supervisory shakeupEuropean Commission makes fintech a priori...
8662 views comments | 34 tweets | 46 linkedin
hands typing furiouslyBlockchain is a new way of thinking?
7328 views 2 | 10 tweets | 1 linkedin
Sophia the humanoid gets UBS conference speaking gigSophia the humanoid gets UBS conference sp...
7080 views comments | 16 tweets | 19 linkedin

Featured job

Competitive base, double ote, benefits
London, UK

Find your next job