It's amazing to me how much of a better product can be created when everything is in one place.
It's obvious that when you're charging customers and paying invoices through the same interface, that you'll have more visibility on your cash flow and it'll generally be easier to use, but this goes so much further.
The reason those loans are easy is because Square know your history of charging customers. The reason they can pay "instantly" into your account is because they don't have to actually move any money until you pay out of your account, the reason they can charge no account fees is because they're charging at the point of taking payments from customers.
The economics of the whole offering are far different to what the regular combo of payment service provider + bank + loan company can provide.
Great move. Square has always been the sort of product that makes me wish I was in a business where I could use it.
Maybe we can also start moving away from feature-limited Saas offerings that are so damn proud that they focus on One Thing And One Thing Only when customers want just one affordable app to handle all their work and not fifty-eleven ones that become crazy expensive.
This is where fintech has been headed for some time -- a bundle of complimentary products all in a single app (payment provider + bank + loan company + crypto + etc.).
Square are demonstrating this here for business, some Chinese finance apps went down this road years ago, Revolut are billing themselves as a "financial super app".
There's tremendous advantage in having everything in one place. Each individual product can be 70% as good as best in market, but the value-add by having everything bundled in one place is huge.
I'm a bit confused about "the regular combo of payment service provider + bank + loan company" - from what I see (perhaps it's a difference between markets?), all that you describe is exactly what most commercial banks offer to businesses, they want to have it all in one place, they can make a better loan offer if they have your cash flows, etc. The main difference between them and Stripe is that a bunch of banks will not do the IT integration part of card payment processing but will only be the 'merchant bank' handling the financial part and settlement after e.g. some merchant gateway routes the individual messages, but they were offering the combo of card acceptance/accounts/payroll/loans/credit lines/etc decades before Stripe existed.
Maybe. Every time Intuit integrates another app into their main QBO product, it makes things worse. To some extent, when they are separate apps that connect to QBO, I get more control over what data transfers. When it’s integrated, they tend to make automatic adjustments with no ability to edit them. Obviously this is a choice they are making to do things a bad way, but my point is just to share a counter example of integration being a net negative.
As a small business owner do you really want your banking to be tied to your POS system though? Why not offer Square 'housing' too. Sell with Square and live in a Square condo[0]
[0] So long as you never ever leave Square for another system.
0 overdraft fees. Yay. More like it. It will force major banks to rethink their overdraft fees as a revenue center. As someone who was not so well financially just a decade ago, overdraft fees seemed like penalty for being poor. When you are living paycheck to paycheck, you never know when your account will get overdrawn. And most evil thing was - bank will deny the charge because you didn’t have enough funds but will still charge you for $34 fee.
Some banks offer overdraft protection but it’s not obvious in lot of banking websites/apps in my experience and has been recent development. Plus - lot of people don’t understand the concept of overdrafts. They assume bank will deny if your account doesn’t have enough funds.
I’m surprised congress didn’t take action on overdraft fees as it mostly affects middle class and poor people.
Overdrafts have been opt-in by regulation since 2010. What banks have done is try to trick people into opting into "overdraft protection," which is really just the old system that allows a customer's checking balance to drop below 0:
https://www.wellsfargo.com/credit-cards/features/overdraft-p... As long as a customer takes no action or just says "no," they won't be allowed overdraw their checking balance.
> It will force major banks to rethink their overdraft fees as a revenue center.
I wish that were true. For significantly more than 10 years I have worked for a major bank that does not charge fees for overdrafts that pull from a loan or savings account. I still have seen few signs of the major banks deciding to follow our lead.
The tyranny of scale creates terrible incentives in banking. Someone whose average balance hovers around $100/month might well cost the bank more money than they can earn off the balance, while someone with $10,000 is basically free.
Normally in services you charge more from the people who are more able to pay, because they'll be willing to spend more money for the same service. Yet in financial services and banking, the more money you have to spend on the services results in the lower fees and costs across the board.
I think if there's something that needs to be systematically altered to close wealth gaps, that's a fine place to start.
I remember over a decade ago or so my bank offered this new overdraft "protection" where you could setup an amount of money to use from your saving account to make up the difference in the event of overdraft. One day I cut a check that was $5 over what was in my checking account and found out there was a $75 fee for overdraft. It was not at all obvious in their advertising that fees would still apply. Never made that mistake again.
I've always thought overdraft protection was disturbingly like "fire protection". As in, three dudes come to your door, and the skinny one says "Nice place ya got here, be a shame if it burned down" while one of the beefy ones fiddles with a Zippo lighter.
Yeah, this is huge in an age where a lot of people are dinged through recurring subscriptions. You could rack up 5 or 6 charges and not even realize it, at which point you're out hundreds of dollars in overdraft fees.
> you never know when your account will get overdrawn
How? It’s not that hard to keep track of money in vs money out. I bet most of it is people that don’t understand it takes time for a cheque to clear or people that know an auto payment will overdraw their account but can’t do anything about it (ie: no money).
Overdraft fees should be illegal, especially for electronic transactions that get rejected.
I think we really have to take a step back away from this annoying scrolling / auto-moving element behavior for product info pages. I had a moment where my mouse was chasing a moving 'Loans' tile.
Designers have gotten really carried away. This stuff looks nice when you click through it in Figma, because it's a slideshow. But when it's interactive it's a pain in the butt.
If you move through the page really slowly it sort of works, but real people in the real world scroll fast to scan the content of the page, and this page is a disaster to scan.
Here I want to learn about the features of Square Banking but I can't do so at a glance, on the landing page for Square Banking. The best solution is to just give up and search Google News for a summary:
> Get a customized offer based on your card sales through Square, and then choose your loan size.
and then a bit further down:
> Repay it automatically with a percentage of your daily card sales through Square.
Such an incredibly obvious idea in hindsight. While I can see why putting all your eggs in one basket like this can pose something of a problem, there's no denying this level of integration is amazing for a small business.
Stripe has been doing this for at least a few months now… maybe since last year.
It’s a nice feature.
Frankly, PayPal has been doing a version of this for years where they would put a hold on your funds and then (usually) offer you a loan that would cover most/all of the money held. Of course, they called all the shots, but the idea was there.
2021 is a great time to own a small regional / community bank. All the mature FinTech companies are trying to buy a bank to expedite the cumbersome bank chartering process (+ mortgage origination and servicing companies are too)
Indeed. And a good time to have a banking as a service business. Have a look at Cross River Bank. They have grown their balance sheet 3x in the last two years.
It’s not just US though. In Southeast Asia same trend; big tech platforms like Grab and Shopee are buying small bank license holders on the cheap to start taking deposits and build their ecosystem on top.
sure, they are, but the bank holding company act (BHCA) restrictions on ownership/source of strength requirements are a kick in the head. You can go the Greendot route (just up and convert yourself to a bank holding company), Varo route (same but get a fresh OCC charter), or take your chances with an ILC application.
>Square, Inc. is a financial services company, not a bank. Banking services are provided by Square’s
banking affiliate, Square Financial Services, Inc. or Sutton Bank; Members FDIC.
Um so they are insured by the FDIC?
Am I doing business with Square, Square Financial Services, Inc., or Sutton Bank?
Do I have any recurse when it comes to typical banking expectations / rules here when it comes to either of the three companies I may or may not be using?
Square Financial Services is a Utah-chartered industrial loan company (ILC) with FDIC insurance [0]. Savings deposits go here.
Checking accounts are at Sutton Bank (partner bank). I assume the split is driven by Square Financial's three-year supervisory plan w/ FDIC and the mechanics of getting square off chase/wells card rails. Green dot did something similar by purchasing a chartered bank.
That’s a really good question. In the event of an insolence, can you as a customer of Square get through to the real banks in the back? Would the banks treat you as their own customer and fulfill their FDIC obligation?
While Square makes (more) sense to get into the banking game, I've noticed a lot of companies only tangentially related to finance doing similar things, and I wonder what it's indicative of:
- T-Mobile offers an exclusive checking account for their customers
- Credit Karma promoting their own debit card
- Robin hood doing "Cash Management"
- Coinbase offering a debit card with crypto rewards
Has something changed with the ecosystem in the past 5 years? I'm half expecting NYTimes to release a banking/checking account these days where you get rewarded with newspapers.
Everyone wants in on the game. There's this really big piece of the pie where fees and interest come into play. Every transaction has fees and some people carry balances that generate a lot of money in interest. It's how credit card providers can offer rewards.
At some point in our future we'll probably see the end of these rewards cards because the government will likely regulate it. Which I think is actually a good thing, because it's the people with the least amount of money that are footing the bill for those of us reaping the rewards.
Its a function of the stability of the bank partnership model and the success of baas apis like galileo, combined with the economics of debit interchange for institutions under the Durbin amendment cap.
Partner banks get more deposits and use their fat interchange rates to attract the developers/promoters of new products.
The others: profiting from interchange fees. If you can get your card to be “top of wallet” you can get a cut of every purchase a consumer makes. If you are a store, like Target, you can also drastically reduce the processing fees you pay to card issuers by redirecting those funds to yourself.
I don't know if anything has changed necessarily, but anecdotally I think the business model has been validated in a high profile way. Accruing returns on stored money (like RobinHood) has largely supplanted the wave of "fresh take on charging you transaction fees" model of Venmo and Cash App.
White label providers is a thing, there's only a handful of operators doing the actual banking/payment services behind that.
The big change is probably that actual banks' brand value got damaged to the point that people trust banking services with random consumer brands stickers on them more than they used to.
Banks are also sticky - people don't often switch them, so once you start, its hard and unlikely you'll move. That helps ensure your product stays in use.
I'm curious about the small business loans. I'm from Europe and the animations suggests for a $9000 loan a total repayment of $10305. Let's assume you make $5000 in revenue per month and they use 10% as a repayment cut per transaction. That would yield a 20 month long repayment schedule. The "interest" would be roughly 7% annually. In today's world, isn't that greedy? In today's world, Warren Buffet can issue a 0% coupon bond[1]. I'm just perplexed. Especially since it's Square and not Goldman Sachs or JP Morgan.
According to the St Louis Fed, the average interest rate for Small Businesses was about 3.5 - 5% [2]. For me this sounds like an incredibly bad deal.
7% is a low interest rate for an unsecured small business loan.
I'm not 100% sure what the FRED chart you cited means by "Effective Loan Rate for Small Business Administration" but those are most likely collateralized.
You have to add profit margin and default risk on top. 7% for a business that you have lots of information about is still pretty bad though. It should be 4% all inclusive. You're right about one thing. The flat fee for the loan actually ends up obscuring the complexity. It's difficult to compare the square loan conditions to conventional ones.
Low-risk yield doesn't grow on trees. 0.5% is about what a 3 year treasury bond was paying at the beginning of the month (its lower now). Banks dont really need deposits to make loans right now either, since the reserve ratio was changed to 0% last year.
So yes, safe, insured deposits in savings accounts dont pay much at the moment. This has less to do with banks being greedy and more to do with current fiscal policy.
Nope. I'm keeping Schwab for my banking needs. The last thing I need is a "bank" with more data about me than they really need and a lack of impeccable phone support.
Unfortunately, it's probably going to take some time for people to realize the benefits of a "slow and inefficient" means of banking with lots of people in between. It sucks sometimes, but boy am I okay with it when they spot fraud or it takes someone days to empty my bank accounts instead of minutes.
These app-only banks seem to prey on the Robinhood customer set: users who respond positively to a nice UI and are willing to pay for it through friction, feature restriction and non-existent customer service.
Retail finance's CLI to the saccharine of these apps is Fidelity. Free CMA with no ATM fees (third-party ATM fees reimbursed), no minimums, free wires in and out, securities able to be held in the account and good customer service on the phone and via chat.
In case anyone was thinking this .5% APY savings account would be great for their company, this launch is just for sole proprietors.
> Your business entity type is a sole proprietorship, meaning you pay taxes for your business as an individual as opposed to another entity type (often the case for self-employed individuals or independent contractors)
They are apparently looking to add other entity types in the future.
Given the issues that Chime customers have had[1], and the fact that this seems to be organized in roughly the same way (actual banking services are provided by a contracted bank at a distance), I'd be a little skeptical.
The biggest question I would have is:
How good the customer support is?
I have the worst luck, and all my new age accounts like Robinhood and Coinbase have little to no customer support compared to the incumbents.
I got lucky and the Robinhood situation resolved itself but I've been trying for over a year to contact Coinbase and circle the drain. Hopefully Square has better support.
Downside to anything associated with @jack is that every tweet is flooded with spammy and low-grade crypto comments. (was checking to see if there was info re the 500 errors)
Also, just to note, Monzo USA and Monzo UK are identical in name only. The US version has a fraction of the features of the UK version and they don't seem to be iterating as quickly as other neobanks after Simple's departure.
I switched to OneFinance and have been generally happy with it as it caters most closely to the old Simple methodology, especially with configurable overdraft that was launched last month.
If anyone has experience with the others and how they've matured since Simple's departure, I'd be interesting to hear what you like and what you're excited for on their roadmap!
Yeah but the banking products are provided by a wholly owned subsidiary (savings accounts and loans) and a partner company (checking accounts and debit cards), both of which are banks. The products are indeed offered by banks owned or partnered with Square, but not directly by Square, Inc. itself.
Huh, I always think of "Brutalism" in the context of web design as "no CSS, no JS, lots of <h1>." I guess maybe it needn't be unstyled, but certainly is unsubtle.
To me this page is architecturally would be something overloaded with pointless decorative elements. Baroque?
After a really bad experience with Chase (and negative experiences with other big banks) I decided to try something different. I ended up settling on Capital One - they have branches, but depending on your area, it may as well be an online only bank.
I use Citibank for my business, I hear you, you can always go into a branch or pick up the phone to speak to a person, but their online banking system is pretty terrible and outdated by about 20 years which is why I often have to pick up the phone. I wish we could have the best of both worlds.
Yeah, I don't trust these startups handling my money. Not only that, but the bank that they have doing back-end services for them, Sutton Bank, seems like a tiny local bank. Guaranteed their own back-end services aren't in-house.
My experience with dinosaur banks (specifically HSBC and TSB) has been one of pure frustration. I can generally tolerate some friction in the system, but just dumb things like "to change your address we need to send you a letter that you need to sign and return to us" make using the dinosaur banks totally radioactive to me relative to using the new generation of fintech apps.
danpalmer|4 years ago
It's obvious that when you're charging customers and paying invoices through the same interface, that you'll have more visibility on your cash flow and it'll generally be easier to use, but this goes so much further.
The reason those loans are easy is because Square know your history of charging customers. The reason they can pay "instantly" into your account is because they don't have to actually move any money until you pay out of your account, the reason they can charge no account fees is because they're charging at the point of taking payments from customers.
The economics of the whole offering are far different to what the regular combo of payment service provider + bank + loan company can provide.
Great move. Square has always been the sort of product that makes me wish I was in a business where I could use it.
arkitaip|4 years ago
fumblebee|4 years ago
Square are demonstrating this here for business, some Chinese finance apps went down this road years ago, Revolut are billing themselves as a "financial super app".
There's tremendous advantage in having everything in one place. Each individual product can be 70% as good as best in market, but the value-add by having everything bundled in one place is huge.
PeterisP|4 years ago
notenoughhorses|4 years ago
purple_ferret|4 years ago
[0] So long as you never ever leave Square for another system.
dm8|4 years ago
Some banks offer overdraft protection but it’s not obvious in lot of banking websites/apps in my experience and has been recent development. Plus - lot of people don’t understand the concept of overdrafts. They assume bank will deny if your account doesn’t have enough funds.
I’m surprised congress didn’t take action on overdraft fees as it mostly affects middle class and poor people.
the_snooze|4 years ago
Overdrafts have been opt-in by regulation since 2010. What banks have done is try to trick people into opting into "overdraft protection," which is really just the old system that allows a customer's checking balance to drop below 0: https://www.wellsfargo.com/credit-cards/features/overdraft-p... As long as a customer takes no action or just says "no," they won't be allowed overdraw their checking balance.
mcherm|4 years ago
I wish that were true. For significantly more than 10 years I have worked for a major bank that does not charge fees for overdrafts that pull from a loan or savings account. I still have seen few signs of the major banks deciding to follow our lead.
duped|4 years ago
Normally in services you charge more from the people who are more able to pay, because they'll be willing to spend more money for the same service. Yet in financial services and banking, the more money you have to spend on the services results in the lower fees and costs across the board.
I think if there's something that needs to be systematically altered to close wealth gaps, that's a fine place to start.
GloriousKoji|4 years ago
Kluny|4 years ago
I've always thought overdraft protection was disturbingly like "fire protection". As in, three dudes come to your door, and the skinny one says "Nice place ya got here, be a shame if it burned down" while one of the beefy ones fiddles with a Zippo lighter.
MisterBastahrd|4 years ago
donmcronald|4 years ago
How? It’s not that hard to keep track of money in vs money out. I bet most of it is people that don’t understand it takes time for a cheque to clear or people that know an auto payment will overdraw their account but can’t do anything about it (ie: no money).
Overdraft fees should be illegal, especially for electronic transactions that get rejected.
dclusin|4 years ago
mario_lopez|4 years ago
burlesona|4 years ago
If you move through the page really slowly it sort of works, but real people in the real world scroll fast to scan the content of the page, and this page is a disaster to scan.
tqx|4 years ago
https://drafts.csswg.org/css-scroll-snap-1/
Here I want to learn about the features of Square Banking but I can't do so at a glance, on the landing page for Square Banking. The best solution is to just give up and search Google News for a summary:
https://finance.yahoo.com/news/square-launches-banking-busin...
https://web.archive.org/web/20210720152407/https://finance.y...
circa|4 years ago
pdpi|4 years ago
> Get a customized offer based on your card sales through Square, and then choose your loan size.
and then a bit further down:
> Repay it automatically with a percentage of your daily card sales through Square.
Such an incredibly obvious idea in hindsight. While I can see why putting all your eggs in one basket like this can pose something of a problem, there's no denying this level of integration is amazing for a small business.
clint|4 years ago
csa|4 years ago
It’s a nice feature.
Frankly, PayPal has been doing a version of this for years where they would put a hold on your funds and then (usually) offer you a loan that would cover most/all of the money held. Of course, they called all the shots, but the idea was there.
bingdig|4 years ago
hestefisk|4 years ago
zonethundery|4 years ago
duxup|4 years ago
>Square, Inc. is a financial services company, not a bank. Banking services are provided by Square’s banking affiliate, Square Financial Services, Inc. or Sutton Bank; Members FDIC.
Um so they are insured by the FDIC?
Am I doing business with Square, Square Financial Services, Inc., or Sutton Bank?
Do I have any recurse when it comes to typical banking expectations / rules here when it comes to either of the three companies I may or may not be using?
zonethundery|4 years ago
Checking accounts are at Sutton Bank (partner bank). I assume the split is driven by Square Financial's three-year supervisory plan w/ FDIC and the mechanics of getting square off chase/wells card rails. Green dot did something similar by purchasing a chartered bank.
[0] https://www.fdic.gov/regulations/laws/bankdecisions/depins/s...
afavour|4 years ago
twobitshifter|4 years ago
Bhilai|4 years ago
Says on the website - "Your account(s) are FDIC-insured up to $250K"
ww520|4 years ago
athorax|4 years ago
eggbrain|4 years ago
- T-Mobile offers an exclusive checking account for their customers
- Credit Karma promoting their own debit card
- Robin hood doing "Cash Management"
- Coinbase offering a debit card with crypto rewards
Has something changed with the ecosystem in the past 5 years? I'm half expecting NYTimes to release a banking/checking account these days where you get rewarded with newspapers.
selykg|4 years ago
At some point in our future we'll probably see the end of these rewards cards because the government will likely regulate it. Which I think is actually a good thing, because it's the people with the least amount of money that are footing the bill for those of us reaping the rewards.
zonethundery|4 years ago
Partner banks get more deposits and use their fat interchange rates to attract the developers/promoters of new products.
clintonb|4 years ago
The others: profiting from interchange fees. If you can get your card to be “top of wallet” you can get a cut of every purchase a consumer makes. If you are a store, like Target, you can also drastically reduce the processing fees you pay to card issuers by redirecting those funds to yourself.
nsriv|4 years ago
meltedcapacitor|4 years ago
The big change is probably that actual banks' brand value got damaged to the point that people trust banking services with random consumer brands stickers on them more than they used to.
nerdponx|4 years ago
vineyardmike|4 years ago
turbinerneiter|4 years ago
htrp|4 years ago
bdcravens|4 years ago
Moeancurly|4 years ago
kylec|4 years ago
circa|4 years ago
yurishimo|4 years ago
ww520|4 years ago
unknown|4 years ago
[deleted]
schleiss|4 years ago
According to the St Louis Fed, the average interest rate for Small Businesses was about 3.5 - 5% [2]. For me this sounds like an incredibly bad deal.
[1] https://cbonds.com/bonds/698053/
[2] https://fred.stlouisfed.org/series/EEBXSSNQ
jvm|4 years ago
I'm not 100% sure what the FRED chart you cited means by "Effective Loan Rate for Small Business Administration" but those are most likely collateralized.
imtringued|4 years ago
htrp|4 years ago
However, you don't account for credit risk whereas the st louis fed rates are based on existing bank small business loans which are very conservative.
Presumably the expected defaults on Squares product would be very very high.....
JCVI-syn10|4 years ago
How insulting, and yet still better than the competition
ac29|4 years ago
So yes, safe, insured deposits in savings accounts dont pay much at the moment. This has less to do with banks being greedy and more to do with current fiscal policy.
psanford|4 years ago
unknown|4 years ago
[deleted]
alberth|4 years ago
If Square did get a bank license - this would be interesting since now they have all kinds of regulatory requirements to meet.
sdljfjafsd|4 years ago
71a54xd|4 years ago
Unfortunately, it's probably going to take some time for people to realize the benefits of a "slow and inefficient" means of banking with lots of people in between. It sucks sometimes, but boy am I okay with it when they spot fraud or it takes someone days to empty my bank accounts instead of minutes.
JumpCrisscross|4 years ago
Retail finance's CLI to the saccharine of these apps is Fidelity. Free CMA with no ATM fees (third-party ATM fees reimbursed), no minimums, free wires in and out, securities able to be held in the account and good customer service on the phone and via chat.
rexreed|4 years ago
gnicholas|4 years ago
> Your business entity type is a sole proprietorship, meaning you pay taxes for your business as an individual as opposed to another entity type (often the case for self-employed individuals or independent contractors)
They are apparently looking to add other entity types in the future.
Spoom|4 years ago
1. https://www.propublica.org/article/chime
eweise|4 years ago
ilyas121|4 years ago
I have the worst luck, and all my new age accounts like Robinhood and Coinbase have little to no customer support compared to the incumbents.
I got lucky and the Robinhood situation resolved itself but I've been trying for over a year to contact Coinbase and circle the drain. Hopefully Square has better support.
htrp|4 years ago
overlordalex|4 years ago
$scrolljackingRant
unknown|4 years ago
[deleted]
bdcravens|4 years ago
bdcravens|4 years ago
All attempts are erroring out; signup endpoint is returning a 500.
Bhilai|4 years ago
garbagetime|4 years ago
vmception|4 years ago
jkaplowitz|4 years ago
imstil3earning|4 years ago
xchaotic|4 years ago
yurishimo|4 years ago
I switched to OneFinance and have been generally happy with it as it caters most closely to the old Simple methodology, especially with configurable overdraft that was launched last month.
If anyone has experience with the others and how they've matured since Simple's departure, I'd be interesting to hear what you like and what you're excited for on their roadmap!
djrogers|4 years ago
So ‘just like a bank, with the same security’ would be more accurate.
bawana|4 years ago
devops000|4 years ago
jkaplowitz|4 years ago
JumpCrisscross|4 years ago
It's Square Banking. Not Square Bank.
gnicholas|4 years ago
bahmboo|4 years ago
isuckatcoding|4 years ago
unknown|4 years ago
[deleted]
sergiotapia|4 years ago
repsilat|4 years ago
To me this page is architecturally would be something overloaded with pointless decorative elements. Baroque?
natchy|4 years ago
jbverschoor|4 years ago
So I'll assume they're like the rest - shitty / no customer support outsourced to god who knows, and they'll change "shifts" every 10 minutes.
No thank you, I'll stay with the good old, dinosaur banks.
bdcravens|4 years ago
jliptzin|4 years ago
JohnWhigham|4 years ago
Just no all around to this product.
fumblebee|4 years ago