Mobile Payments Leader Square’s Banking Push Winds Down
We all likely know Square for its payment processing operations, and its move to open up the mobile payments field to small businesses the world over. It recently made an attempt at becoming a full bank, though—like a lot of other fields in the industry have—and new reports note that the latest attempt didn’t exactly end well.
Square submitted an application to the Federal Deposit Insurance Corporation (FDIC) for what’s known as an Industrial Loan Company (ILC) license back in September of 2017. With an ILC, companies can not only carry out banking services like taking deposits and making loans, but can also provide other commercial services that aren’t specifically financial. Fully-licensed banks can’t engage in such practices, but those with an ILC can.
Square had been trying to get into banking for some time, and its latest push with the ILC license pursuit wasn’t exactly well-received. The Independent Community Bankers of America (ICBA) had actively protested the move, calling it an end run around the Bank Holding Company Act.
With the latest effort nearly a year old, Square voluntarily withdrew its attempt, though it plans to refile the paperwork later on and start up afresh. Square offered a statement, noting “We have been engaged in constructive dialogue with the FDIC, and our decision to withdraw and refile was a procedural step in the review process that will allow us to amend and strengthen some areas of our FDIC insurance application.”
It’s not surprising to see Square—or any other mobile payments firm—look seriously at banking. Why not? After all, banking and payments go hand-in-hand; it’s just the electronic equivalent of a checking account. When that’s already in place, why wouldn’t they want to access the other, potentially profitable, parts of banking like lending? Why wouldn’t they want the capital that is people’s savings accounts or longer-term certificate of deposit (CD) issues?
Why Square bugged out of the process is unclear, but its reasons for wanting in in the first place couldn’t be much clearer. It almost certainly won’t be quitting without a fight, so look for Square to start it all back up soon.