Square Takes Aim At Opening Bank

Square’s value in mobile payments is hard to dispute. This is the company that let a whole lot of small businesses readily take credit cards, even when they barely understood how a credit card operation actually worked. With the rise of other mobile payments systems, however, this has put Square in a less than desirable position, being just one more firm in an increasingly crowded house. Square seems ready to branch out, though, and reports note that Square has filed for a banking license.

The reports further note that, with Square in possession of a banking license, it will once again look to the small business segment. As it did for payment processing, Square will offer those small businesses a variety of different services, including loans and deposit operations.

Interestingly, Square already has some lending operations in place; it works with a partner bank, Celtic Bank, to offer small business loans and has been doing so since 2014. Its average loan size is around $6,000. If Square were to land this banking license, though, it would be able to make its own loans without Celtic Bank’s involvement.

It would be easy to dismiss this notion as Square jumping into a crowded market at totally the wrong time; that’s just what one comment, ironically made to Twitter, noted. Yet Jack Dorsey, Square’s CEO and Twitter’s co-founder, noted that Square itself was a move into a crowded market, and one that paid off quite well.

It’s a worthwhile idea, particularly if Square can compress its services into a mobile application. Mobile banking can be an excellent tool for small businesses, particularly those who don’t have time to make a run to the bank on a regular basis to deposit checks. We’ve already seen several features that would help here, like the ability to photograph checks for deposit or access to ATMs, and there could be some ways a Square bank could distinguish itself. Readily-available factoring services, for example, could be a big deal.

Square could do a lot of things as a small-business-focused mobile-only bank, and these would be welcome in the field. It doesn’t really matter how crowded your market is if you’ve got a good product to offer, and Square’s could be among the best.