By Taylor J. Kovar – CEO/Founder, Kovar Wealth Management
–Hi Taylor – I saw that Square launched a new bank. What’s the deal there? Can any business become a bank? Are they trustworthy? How do I decide where to keep my money?
–Hey Lauren – When you step back to look at it, the evolution of banking and finance has been nuts over the last decade. Depositing checks on our phones, taking payments with personal credit card readers, and doing all of our banking through companies that exist entirely online. It’s a far cry from the days of piggy banks at home and cash in a credit union vault.
There’s no reason to be afraid of the Square bank. In fact, like so many digital banking options, there are some serious benefits to consider, assuming you qualify for their services.
- Trustworthiness. If you’re having trouble letting go of the brick and mortar bank, rest assured that the online options are still FDIC insured and offer all the protections of a Chase or a Wells Fargo or a B of A. The company has strong liquidity and a lot of leverage with its existing platform, so it’s hard to imagine this venture falling apart. The fact that Square got a bank charter is kind of a big deal, since most fintech banks partner with larger companies to use existing charters.
- Loans and limited deposits. From what I understand, not just any person off the street can open a checking account with Square. This move into the banking world is to accommodate all the clients who use the payment app, now allowing them to take out small business loans as well as depositing cash directly into the Square bank instead of taking a payment and then transferring that money on to another account. It’s pretty easy to get a Square reader and start taking payments, but your sales volume probably has a lot to say about whether or not you can open an account.
- Fintech is the future. Clearly, digital banking wasn’t just a flash in the pan. This alternative to traditional banks still offers great interest rates and a lot of flexibility for checking and savings accounts. The banks we all grew up with have taken a lot of steps to get their piece of the digital pie and that’s only accelerated the popularity of online banking. Whether you keep your invisible cash with Square or Ally or USAA, there’s no reason to have less faith in that company than you have in whatever bank building is closest to your house.
No reason to rush out and get an account with Square, but it’s a development worth keeping an eye on and a reminder that the fintech movement has only made the financial sector stronger. Thanks for the question, Lauren!
