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Square announced this week that its industrial bank, Square Financial Services, has begun operations.

Operating a bank enables Square to originate its own loans rather than relying on a partner bank. In its announcement, the company said that the primary purpose for the bank would be to offer business loans and deposit products, beginning with small business loans through Square Capital, and serving as the primary provider of financing for the company’s U.S. sellers.

The ability to offer banking services itself has been years in the making for Square. The company first applied for an industrial loan company (ILC) charter in 2017. After withdrawing the original application to address concerns from the regulator, it reapplied late in 2018.

The company received conditional approval from the Federal Deposit Insurance Corporation and the Utah Department of Financial Institutions nearly a year ago. The bank is headquartered in Salt Lake City.

ILC charters allow companies that are not traditional financial institutions to collect deposits and offer loans. As more companies such as Square seek these types of licenses, the idea has encountered resistance, primarily from traditional financial institutions. Opponents have maintained that industrial loan company charters represent a loophole through which companies can avoid the legal restrictions and supervision requirements placed on banks.  

Square described the new bank as strengthening its “unique ability to expand access to loans and banking tools to underserved populations.”

“Bringing banking capability in-house enables us to operate more nimbly, which will serve Square and our customers as we continue the work to create financial tools that serve the underserved,” said Amrita Ahuja, Square, Inc. chief financial officer and executive chairwoman of the board of directors for Square Financial Services.

“We thank the FDIC and Utah DFI for their partnership enabling us to reach this milestone, and look forward to continuing to expand access to financial services at this critical time for small businesses.”