With New Debit Card, Square Continues Inching into Banking Territory

Square’s announcement that it is launching a debit card for its small business customers – just a day after two financial services giants announced plans to merge – has brought the threat legacy providers feel from fintech disruptors back to the forefront.

Last week, Square launched its new Square Card, a free debit Mastercard that makes funds available to Square sellers as soon as they make a sale. The cards can be used anywhere Mastercard is accepted.

The card is linked to the business’s point of sale, the company said. According to the card terms, the funds are stored in a prepaid account held at Sutton Bank. The business can choose to transfer money in its own linked bank account in one to two business days for no fee, or immediately upon request for a 1% fee.

“As sellers make crucial spending decisions, we know that fast access to funds — and the ability to put proceeds from sales to use immediately — can help with overall cash flow management,” Alyssa Henry, Seller Lead at Square, said in a press release.

“Small businesses have to be nimble. They don’t have the time to wait for funds to clear a bank account, or the resources to easily reconcile personal versus business expenses. Square Card addresses these pain points, and further extends Square’s ecosystem of products and services for small businesses,” she said.

The card also offers reporting capabilities that separate personal and business expenses, and sellers can export transaction data from their Square Dashboard for accounting purposes, the company said.

The news comes less than a week after Fiserv announced its acquisition of First Data, as if to further emphasize the competitive pressures Square has placed on traditional financial services.

According to CNBC, Fiserv CEO Jeffery Yabuki acknowledged this pressure on the company’s earnings conference call:

“A lot of banks especially in the community spaces are worried about companies like Square,” Yabuki said. “And what do you do where Square has a growing, rapidly growing, point-of-sale lending business and that’s going to take money out of the revenue line of the banks.”

The new card is just Square’s latest foray into bringing more of the financial services traditionally offered by financial institutions to its sellers. It filed for an industrial loan company license for the second time in December. It had pulled its first application last summer, saying that it planned to address regulator concerns and try again.