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Square closes up nearly 5% after Jack

Dorsey’scompany launches its own bank

KEY POINTS

· Shares of Square jumped as much as 7% Tuesday after the companyofficially launched its banking operations.

· Square Financial Services will offer FDIC-insured deposit accounts andloans to small businesses that have historically used the company for paymentprocessing.

· The company had been working on launching a bank for more than fouryears.

· Sharesof Square jumped as much as 7% Tuesday after the company officially launched its banking operations this week.

· Thecompany’s stock closed up 4.6%.

· Square’snew, wholly owned bank will offer FDIC-insured deposit accounts and loans tosmall businesses that have historically used the company for payment processing.

· SaltLake City-based Square Financial Services said Monday it will initially focuson offering business loan and deposit products, beginning with underwriting andoriginating business loans for Square Capital’s existing lending product.

· Beforeits launch, Square Capital loans were issued through a partnership with CelticBank.

· “Bringingbanking capability in-house enables us to operate more nimbly, which will serveSquare and our customers as we continue the work to create financial tools thatserve the underserved,” Square CFO Amrita Ahuja said in a statement.

· Thecompany had been working on launching a bank for more than four years, andSquare received regulatory approval last March. “We do not expect the bank tohave a material impact on Square’s consolidated balance sheet, total netrevenue, gross profit, or Adjusted EBITDA in 2021,” the company said.

· Whileit’s only on the merchant side for now, the move signals Square CEO JackDorsey’s broader ambition of making the tech company a one-stop shop for finance.Square also has a track record of building fast-growing products internally. Cash App, which started as a smaller internalproject, now makes up roughly half of Square’s gross profit.

· Square’smove paved the way for other fintechs that may want to cut out the middleman inbanking. Fintech company Sofi applied for a national bank charter last year.But the version Square went with — an industrial loan charter, or ILC — hashistorically run into pushback from bank lobbyists. The industry has criticizedit as a way for companies to skirt rules that have historically separatedbanking and commerce.