The news: The fintech, which provides point-of-sale payment and credit solutions to small and medium-sized businesses (SMBs), expanded its offering to savings and checking accounts. As part of the move, it is rebranding Square Capital—its lending product—as Square Loans.
More on this: Square’s new banking solutions are currently available to its customers and will complement other parts of its business.
- Square Savings: The FDIC-insured accounts carry a 0.5% annual percentage yield, and will not be subject to minimum deposits, balance requirements, or account fees. Businesses can automatically save a portion of each sale, and could direct the funds into customizable folders designated according to the goals they’ve chosen.
- Square Checking: The accounts are provided through Sutton Bank, Square’s partner bank, and build off the success of the Square Debit Card—which businesses could use to immediately spend the funds in their checking account. Customers can make instant transfers between their Square Savings and Square Checking accounts for free, and are also spared any account minimums, overdraft fees, and recurring fees. Also, businesses soon will be able to deposit checks directly into their account through the Square Point of Sale app.
The bigger picture: Square’s new products strengthen its competitive position in the escalating SMB banking arms race underway among fintechs.
- US-based corporate credit card provider Brex—which raised an impressive $425 million Series D round in April of this year—counts SMBs as 45% of its customer base. The fintech has ambitions to grow this cohort even further: It rolled out an SMB-focused, multi-purpose financial platform alongside its capital raise, and in May, it directed a nationwide marketing campaign at local businesses.
- Revolut, which recently noted its business accounts more than doubled to 500,000 in 2020, has also set its sights on the US. Its $800 million in freshly raised capital could give the UK-based neobank enough firepower to make a strong foray into the US.
The big takeaway: Square’s merchant base represents a vast resource it can tap into to get ahead of its well-funded opponents. It already supports at least 2 million merchants globally and is one of the most-used business platforms by SMBs. Square can immediately begin upselling its new platform to this large audience—and promote how SMBs that centralize their banking activity in a single location can benefit if they shift funds to its new savings and checking accounts.