Square Inc. is deepening its involvement in the world of banking with new savings and checking accounts for businesses.
The financial-technology company, which began operating an industrial bank earlier this year, had already been offering loans to its small-business customers but announced the new free bank accounts Tuesday. Square’s
checking account will work with the company’s Square Debit Card product, which the company launched in 2019.
Square offers payment-processing services that are popular with small- and medium-sized businesses, and the company views its checking and savings accounts as an extension of its efforts to give smaller businesses the same access to financial services that larger businesses get, according to Christina Riechers, the general manager of Square’s business-banking initiatives.
The company’s work with its Square Debit Card, formerly called the Square Card, found that for 54% of users, the product was their first experience with a business debit card. That suggested to the company that many of its merchant customers were using their personal bank accounts for business purposes and mixing funds there, something that Riechers said would make it difficult for business owners to get a true sense of how their operations were performing.
“That people were relying on us as a quasi-business bank account gave us confidence we could usher them into business bank accounts,” Riechers told MarketWatch. The debit card already provided perks like the ability for merchants to spend funds instantly, but the new business checking account will add functionalities including a routing number and FDIC insurance.
On the savings side, Square will offer tools that automate some aspects of financial management, giving sellers the option to set aside a certain portion of sales for a rainy-day fund or for taxes. While salaried workers see taxes automatically deducted from their paychecks, sole proprietors “have to anticipate tax implications and what they might be in a later quarter of the year,” Riechers said.
Square will also continue to offer small-business lending that looks at a seller’s transaction history to help determine loan offers, a function that was transferred over to the in-house bank earlier this year. The company is switching the name of that part of its business, previously called Square Capital, to Square Loans.
Financial-technology companies have shown a growing interest in the world of banking lately. SoFi
recently announced a deal to acquire a community bank that would speed up its process of obtaining a bank charter, while European fintech company Revolut is also looking for a U.S. banking license. While many fintech companies began with the intention to serve as alternatives to traditional banks, some have argued that bringing banking functions in-house will enable them to operate more efficiently.