Jack Dorsey’s company Square opens a bank

Co-Founder and CEO of Twitter Jack Dorsey has seen his other business, Square, launch its banking operation Square Financial Services.

Square’s new, wholly owned bank Square Financial Services will offer Federal Deposit Insurance Corporation-insured deposit accounts and loans to small businesses that have historically used the company for payment processing.

"Bringing banking capability in-house enables us to operate more nimbly, which will serve Square and our customers as we continue the work to create financial tools that serve the underserved," said Amrita Ahuja, Square CFO and Executive Chair of the board of directors for Square Financial Services. "We thank the FDIC and Utah DFI for their partnership enabling us to reach this milestone, and look forward to continuing to expand access to financial services at this critical time for small businesses."

Shares of Square jumped as much as seven per cent on Tuesday after the launch. The stock closed up 4.6 per cent.

Square Financial Services, based in Salt Lake City, Utah, will initially focus on offering business loan and deposit products, beginning with underwriting and originating business loans for Square Capital’s existing lending product. Almost 60 per cent of loans through Square Capital go to women-owned businesses, compared to 17 per cent of traditional loans; and 35 per cent of loans through Square Capital go to minority-owned businesses, compared to 27 per cent of traditional loans, said Square.

Before its launch, Square Capital loans were issued through a partnership with Celtic Bank.

The company had been working on launching a bank for more than four years, and Square received regulatory approval last March.

"We do not expect the bank to have a material impact on Square’s consolidated balance sheet, total net revenue, gross profit, or adjusted EBITDA in 2021," the company said.

The move to merchant banking signals Square CEO Jack Dorsey’s broader ambition of making the tech company a one-stop shop for finance. Square also has a track record of building fast-growing products internally. Cash App, which started as a smaller internal project, now makes up roughly half of Square’s gross profit, CNBC reported.

The company was founded in 2009 by Jack Dorsey and Jim McKelvey and launched its first app and service in 2010. It has been traded as a public company on the New York Stock Exchange since November 2015.