Square Competes Directly with Traditional Banks for Small Business Banking
The much-anticipated announcement from Square came yesterday (July 20) with details of a suite of new products for small businesses. Here’s an overview of their announcement:
Today, Square launches Square Banking, a suite of financial products purpose-built to help small business owners easily manage their cash flow and get more out of their hard-earned money.
Square Banking consists of three core products designed to help small business owners confidently manage cash flow stress: two new deposit accounts, Square Savings and Square Checking, join Square’s existing lending capability, now called Square Loans. By offering essential banking tools that work seamlessly with Square’s ecosystem of solutions like payments and Square Payroll, sellers now have a single home for their entire business, gaining a unified view of their payments, account balances, expenditures, and financing options.
With Square Checking, Sellers can immediately spend their funds with their Square Debit Card, send and receive money via ACH with new account and routing numbers, or use their balance to pay their teams with Square Payroll. Square Checking has no account minimums, overdraft fees, or recurring fees, and sellers are able to instantly move funds between their Square Savings and Square Checking accounts whenever they need to, at no cost. Soon, sellers will also be able to deposit checks via the Square Point of Sale app, helping them further consolidate business funds into one place.
This part is all pretty standard product fare for traditional banks and credit unions, but there are some key differences:
Price: The accounts do not charge maintenance or transactions fees, minimum deposits and balance are not required either.
Savings Rate: The current savings rate is .5%, much higher than average.
Instant Receipts: Merchants can receive instant access to their card sales processed through Square. Only a few traditional banks have begun to offer this option.
The loan is offered through Square’s Industrial Loan Company (ILC) charter it was granted recently and the checking account with debit card access is offered through a relationship with Sutton Bank.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group