One person running another person's card through a Square device.
Photo: Christiann Koepke/Unsplash

How Square is putting its bank charter to work

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Tuesday: Square is looking more like a bank than ever, Kin is the latest SPAC, and ARK's Cathie Wood is set for a bitcoin gabfest with Elon Musk and Jack Dorsey.

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The Big Story

What Square is banking on

Since March, Square's been a bank (or, more technically, owned one). Now it's really acting the part. Today the company's announcing Square Banking, a group of products for small businesses which includes savings, checking and loans.

It's official: Square isn't about just payments anymore. The move helps solidify the company's diversification of its core Seller business.

  • Square just bought Crew, a messaging app. It offers other products such as shift scheduling for workers and digital time cards in addition to financial tools such as payroll and tax preparation.
  • Outside of its merchant services division, Square as a company is expanding more broadly to other areas. It bought a majority stake in Tidal, a music streaming service, and is launching various crypto initiatives.

Payments are still at the core, though. Square Checking, Banking and Loans are all connected, and tied to payments done through Square's hardware and software.

  • Square Banking benefits from its tight integration with Square's payments products. Merchants can access payments they receive from customers via Square instantly in Square's checking and savings products.
  • Square introduced a debit card in 2019 which gave similar fast access to cash from sales. But full banking means sellers can pay bills from the account using ACH and deposit funds from sales made through other, non-Square channels.
  • Many merchants still use personal accounts for their businesses," said Christina Riechers, who's leading Square Banking. Last year 54% of Square debit card users said it was their first business debit card. "This helps sole proprietors transition away from personal bank accounts," Riechers said.
Screenshots of Square\u2019s new banking services.Square's new banking services. Image: Square

Farewell to the fintech middlemen? Many fintech companies aren't actually banks, and rely on rent-a-banks or other partners to provide financial services. With its own chartered bank, Square is moving past that model — but not completely.

  • A number of fintech companies such as Lending Club and Varo also have chartered banks, which allow them to offer more products directly. SoFi reportedly also has conditional approval for a bank charter and Figure has applied for one.
  • Square's banking launch is the coming-out party for Square's bank, Square Financial Services, whose charter was approved in March.
  • The savings and loans products are operated by Square Financial Services—the loans use the deposits to lend. Square Loans, previously known as Square Capital, offers merchants loans based on their sales, without needing to use personal credit history.
  • Square's new checking product uses Sutton Bank as its bank sponsor. Sutton already runs Square's debit card. It's a model that most fintech companies use, though it has been criticized by some members of Congress and consumer advocates. It would make sense for that product to move to Square's bank eventually, but Riechers said there were no current plans to make a change. Still, Square has operational flexibility it didn't have before.

Will this mean more loans for small businesses? That's the crucial question. Small businesses have long struggled to get access to capital for growth from big banks.

  • Square has facilitated over $9 billion in loans (including emergency PPP loans) to more than 460,000 sellers with an average loan size of $6,700.
  • In 2019, 58% of Square's loans went to women-owned businesses. "This has really allowed us to extend credit to a population that traditionally has been underserved," Riechers said.

Reichers sees what Square is doing for banking as analogous to what it did in payments over a decade ago — making credit-card payments accessible to a whole new group of entrepreneurs: "Small businesses haven't had the same access to financial services as the large companies."

— Tomio Geron


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Join Protocol's Jamie Condliffe for a conversation with Zoox's Ashu Rege, Qualcomm's Alex Vukotich, Luminar Technologies's Christoph Schroeder and Verizon's Jyoti Sharma
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From Protocol | Fintech

Everything you need to know about the Paytm IPO. The Indian payments company is much more than just a payments company.

Republicans are suspicious of China's digital yuan. They're urging U.S. Olympians to avoid the electronic currency when attending next year's Winter Olympics in Beijing.


  • "There's a nervousness among investors that this is the cost of doing business to keep clients from bleeding to fintechs."Brian Foran, bank analyst at Autonomous Research, on increasing spending by big banks on technology and payroll.
  • "Crypto is not going to solve wealth inequality — it's not trying to create the same outcome for everyone. But it does create wealth mobility and more equality of opportunity for everyone."Coinbase CEO Brian Armstrong, responding to Dogecoin co-creator Jackson Palmer, who had criticized cryptocurrencies on Twitter as a tool of the wealthy and powerful.
  • "We believe Cash App may be en route to becoming the ultimate neo-bank and the money center bank of the future. This could make buying SQ [Square] analogous to buying J.P. Morgan in 1871." Mizuho Securities analyst Dan Dolev in an upbeat note to clients on Square.
  • "During this talk, we will sing a cover of The Final Countdown by Europe." Elon Musk, tweeting about Wednesday's live discussion about bitcoin with Jack Dorsey and ARK Invest's Cathie Wood.
  • "Can I wear a wig?" Jack Dorsey, responding to Musk's tweet.

Need to Know

Jack Dorsey and Elon Musk are set to talk bitcoin. The two tech founders and investor Cathie Wood, CEO of ARK Invest, will have a live discussion on Wednesday about bitcoin as part of the launch of the B Word initiative of the Crypto Council for Innovation. Wigs optional (see above).

Tipalti said its revenue grew 115% in the first half of 2021. The payments automation software company said it recorded more than $23 billion in annualized transactions in the first half of 2021, up sharply from the year-ago period.

Kin is going public via a SPAC. The home insurance technology company is going public through a SPAC merger with Omnichannel Acquisition Corp. led by entrepreneur Matt Higgins.

Making Moves

  • Arianna Simpson is now a general partner at Andreessen Horowitz. The Facebook executive turned crypto entrepreneur will help lead the venture capital firm's $2.2 billion cryptocurrency fund.
  • Gary Gensler is filling out the SEC's policy team. The head of the SEC announced five new policy regulators — Corey Klemmer, Adam Large, Mika Morse, Sirimal Mukerjee and Sai Rao — spanning finance, trading, markets and climate.

Deal Flow

  • is buying Invoice2go for $625 million. The business bill-payment company is buying the mobile-first accounts receivable startup.
  • Daloopa raises $20 million led by Credit Suisse. The AI data extraction company services hedge funds and other financial institutions.
  • Lightico raised $15 million. The software company, which helps businesses in financial services and other industries manage their workflow, said the follow-on Series B funding was led by Capital One Ventures.

3 Questions With...

Peter Colis, CEO, Ethos

What fintech trend is most troubling for you?

A decade or more into the fintech revolution there's still a big opportunity to democratize services for the middle market — people with low credit. Traditional financial firms have a high-cost operational cost structure, which leads to their generally targeting high-revenue client prospects. Alternatively, automated fintech companies don't have much incremental cost or fixed cost structure to service a customer, so they can provide the same high-quality service at-scale to a broader demographic audience, with less importance placed on the transaction size.

What's been your biggest professional blunder and how did it help you?

I've previously made the mistake of not reevaluating someone's role in the company frequently enough as the company scales. The battle-hardy team we started with when we were a lean startup wore a lot of hats, and as we've grown, team members often evolve towards a more specific role suited to their skills. I remind myself to check in with team members — and myself — often about how their job descriptions have changed over time, and if their responsibilities should reflect that.

What fintech company — besides your own — have you been most impressed with this past year?

I admire Hippo, which offers home insurance. Underwriting a home instantly is hard, and they've done it on a completely digital substructure, like Ethos in life insurance. Many insurtech companies focus on the purchase process, which is understandable because that's been so manual and frustrating. But Hippo's gone beyond that with an end-to-end platform and a focus on the post-purchase customer experience, supported by innovations that help homeowners reduce claims through installing IoT home monitoring devices.

Data Point


That's the new weekly purchase limit for cryptocurrency purchases by eligible PayPal customers in the U.S., up from $20,000. PayPal also did away with a $50,000 annual purchase limit.


Buy-side leaders who make data-driven decisions now could prosper for years to come. That's why asset managers are prioritizing data and analytics initiatives at a faster rate than ever before. Broadridge helps you transform operations, strengthen client relationships and uncover opportunities that others may miss.

Learn more

Thanks for reading — see you Friday!

Clarification: We changed some language around Square's ownership of a bank subsidiary to avoid any confusion.

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