SAN FRANCISCO–Payments processor Square has announced plans to refile an application for an industrial loan company charter with the FDIC.
The refiling of the application follows Square’s withdrawal of a similar application to open a depository bank in July of this year. At the time Square withdrew its application it indicated it would again seek a bank charter.
At the time of its initial filing, Square sought to locate the bank in Salt Lake City with capitalization of $56 million. Square said it was seeking to meet loan demand among the merchants that use its payments devices.
Many have been forecasting that fintechs such as Square would look to more formally enter the banking space. As CUToday.info has reported, in other cases fintechs have partnered with banks rather than seek to obtain a charter themselves.
The Square application drew some criticism from NAFCU, which says there are “loopholes” in the federal banking rules.
“If Square, or any other fintech company, wants to apply to become a bank then they should do so without skirting regulatory responsibilities through a gaping loophole in the law,” said NAFCU President and CEO Dan Berger in a statement. “The current ILC regime was never intended for fintechs to enter the banking world with an unlimited scope. Instead of letting fintechs exploit the ILC process, policymakers should pause, review and ultimately pick an appropriate regulatory regime, which in many cases could be a specific fintech charter. In many other cases, the provision of financial services should be left to consumer friendly depository institutions like credit unions.”