Payments company Square has won conditional approval from the Federal Deposit Insurance Corporation to become a deposit-taking bank via an Industrial Loan Company (ILC) licence.
Industrial loan charters give companies permission to carry out banking services but also enables them to continue providing other non-financial commercial services - a practice that is denied to fully-licensed banks.
Square was forced to withdraw its initial 2017 application to FDIC after facing fierce opposition from the Independent Community Bankers of America (ICBA), which protested to the FDIC that the company's application was designed to avoid legal prohibitions and restrictions under the Bank Holding Company Act.
The revised application was refiled in December 2018.
“We appreciate the FDIC’s thoughtful approach to our application, and their recognition that Square Capital is uniquely positioned to build a bridge between the financial system and the underserved,” says Jacqueline Reses, Square Capital lead and executive chairwoman of the board of directors for Square Financial Services. “We’re now focused on the work ahead to buildout Square Financial Services and open our bank to small business customers.”
The new Utah-based bank, Square Financial Services, is expected to launch in 2021, offering small business loans for Square Capital’s commercial lending business, and to offer deposit products.