Square is looking to become a one-stop shop for small businesses
The digital-payments app said on Tuesday that it will offer banking services for this group, a move one analyst said was “inevitable” as Square expands its offerings beyond payments processing.
Square’s (ticker: SQ) stock closed up 4.4% to $257.25 on Wednesday, while the S&P 500 was up 0.8%. Shares have gained 18.2% year-to-date, and the company had a strong first-quarter showing, beating earnings estimates by more than twofold.
The announcement of Square Banking follows the opening of Square Financial Services in March, which offers business loans and deposit products.
“This was an almost inevitable next step in terms of Square’s effort to increase engagement with small businesses,” says Matt Palmer, an analyst at BTIG. “The advantage that Square has is that they’ve got an embedded base of customers in the small business area, who are already using many of their services.”
Square Banking will offer FDIC-insured checking and savings accounts. The checking account will be linked to Square Debit Card and has “no account minimums, overdraft fees, or recurring fees.” The savings account will have a 0.5% annual percent yield.
Square has been a crucial tool for those underserved by traditional banks, says Palmer, including the unbanked, underbanked and small businesses. With 35 million users on Cash App, Square’s peer-to-peer payment app that many used to receive government stimulus payments, the company has potential to tap into a much larger user base as it expands its financial services.
“Small businesses are the heartbeat of our communities and our economy,” Christina Riechers, Square Banking’s head of product, said in a statement, adding that small businesses have had to face “numerous hurdles” to access vital financial services.
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