The Federal Deposit Insurance Corporation (FDIC) has conditionally approved the deposit insurance application of Square Financial Services, the de novo industrial bank created by payment services provider Square.
The move clears the path for Square's banking effort to go live next year.
According to a press statement by the FDIC, the new bank will issue commercial loans to merchants who use Square’s payment system to handle card transactions. Applicants will be evaluated based on their financial history and conditions, their management system, their risk level, the needs of their customers, and their level of alignment with the purposes of the Federal Deposit Insurance Act.
"Thank you!" said CEO Jack Dorsey in a response tweet.
In a blog post, Square also revealed that it "also received charter approval from the Utah Department of Financial Institutions."
"The bank, Square Financial Services, is expected to launch in 2021. It will operate independently, as a direct subsidiary of Square, Inc. Its primary purpose will be to offer small business loans for Square Capital’s commercial lending business, and to offer deposit products," the firm said.
Meanwhile, Square is refunding its customers for all software subscription fees for March to help sellers mitigate their cash flow problems. According to a company announcement, services covered by the refund policy include Square appointments, retail, restaurants, loyalty, team management, payroll, marketing, and Square online store.
“One of the biggest problems sellers have right now is cash flow,” Dorsey explained the reason behind the refund policy in a tweet. “We’re working hard on short and long-term solutions. Here’s a start, more to come.”
This piece and its headline have been updated with new information.