Payment processor Square has withdrawn its application to become a deposit-taking bank, a move similar to online lender Social Finance or SoFi, which withdrew its application last fall. However, unlike SoFI, Square plans to refile its application, attributing Thursday’s withdrawal to mere procedural issues. It plans to reapply with the FDIC, but did not reveal a timeline.
In a statement released to Reuters Friday, Square said:
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…. We continue to work closely with the FDIC and Utah DFI on our applications.
The details around this “procedural step” have not been disclosed. Bank Innovation has reached out to Square and is awaiting response.
Based in San Francisco, Square applied for an industrial loan company (ILC) with the Federal Insurance Corp. or FDIC to form a new bank called Square Financial Services Inc. in September. The bank was to be headed by former Green Dot CEO Lewis Goodwin and chaired by Jacqueline Reses, who currently heads Square’s lending arm, Square Capital. Its ILC application with the State of Utah Department of Financial Institutions is still intact.
This new bank would offer small business loans. Having its own banking license would allow Square to operate without its current banking partner Celtic Bank.
Since its launch in 2014, Square has originated over $2 billion in loans to over 140,000 SMBs.
It’s well known that applying for a banking license in the U.S. is a tedious and expensive process. That’s probably why no fintech has successfully done it yet. In fact, even challenger banks like Germany’s N26, which has a pan-European banking license, opted against it for its U.S. operations.
Back in October, SoFi withdrew its application only a month after submitting it to the FDIC. For this withdrawal, SoFi cited leadership changes after its founder and then CEO Mike Cagney stepped down following allegations of sexual harassment.
Current accounts provider, Varo Money, in January raised $45 million to apply for its own banking charter. Whether it is still pursuing that goal is unclear, Varo Money could not be reached for comment.
Square, which trades on the New York Stock Exchange under the ticker symbol SQ, is trading at $64.88 as of 11.00 AM ET, slightly higher than its $64.14 closing price yesterday. Square has a market cap of $25 billion.Like This Post