Finovate
Blog

Digital payments company Square announced it will launch its small business bank next year. Square’s application for the bank, Square Financial Services, has been conditionally approved for a bank charter.

Square Financial Services will operate as an independent subsidiary of Square. The new bank’s primary objectives will be to offer small business loans for Square Capital’s commercial lending business, and to offer deposit products.

“We appreciate the FDIC’s thoughtful approach to our application, and their recognition that Square Capital is uniquely positioned to build a bridge between the financial system and the underserved,” said Jacqueline Reses, Square Capital Lead and Executive Chairwoman of the board of directors for Square Financial Services. “We’re now focused on the work ahead to buildout Square Financial Services and open our bank to small business customers.”

In preparation for the launch of the new bank, Square has begun the hiring process to staff its new bank headquarters, which will be located in Salt Lake City, Utah. Square Financial Services CEO Lewis Goodwin and CFO Brandon Soto have been charged to lead the bank’s executive team.

This comes just one month after P2P lending company Lending Club announced plans to purchase Radius Bank. The move offers Lending Club users a full suite of banking tools. Square also follows in the footsteps of Varo Money, which received approval for deposit insurance from the FDIC in February.

Are middle class banking customers a silent majority that can be successfully marketed to as a cohort of their own?

That’s the wager of former PayPal and Intuit CEO Bill Harris, whose digital bank for middle class Americans, One, has just raised $17 million in funding. The capital infusion brings the San Francisco, California-based firm’s total capital to $26 million.

“Middle-class American families are being left out, and we built One specifically for them,” Harris said. “One will combine the technology and convenience of challenger banks with a full-suite of products that traditional banks offer.”

The Series A round featured participation by Foundation Capital, Core Innovation Capital, and Obvious Ventures. Harris initiated the round last year in partnership with One CEO Brian Hamilton, formerly the CEO of Azlo. The digital bank is in private beta now and is slated for a launch this summer. One will offer competitive rates for savers, and combine debit and credit into a single account with one card.

“The current financial system breaks up the money people earn into silos, making it hard for busy families to stay on top of their banking and credit accounts,” Hamilton explained. “Most people have a balance in their checking account that earns nothing and outstanding debt on their credit card that costs too much.”

One accountholders earn 3% APY on their balances when saved via One’s Auto-Save feature (1% APY on other saved balances), and can borrow at a monthly rate that is as low as 1%. No interest is charged on funds repaid within the borrowing month, and accountholders can increase their credit limit by setting up direct deposit.

One also supports shared “pockets” for saving, spending, and borrowing, to make it easier to share funds with family members, roommates, team members, and others. The digital bank charges no overdraft or cash advance fees, does not require a minimum balance, and provides access to more than 55,000 ATMs.

“One is designed to maximize a family’s hard-earned paycheck by unifying saving, spending, and borrowing into one account,” Hamilton said. “When this money is being managed from one place, people save more, are charged less, and gain control.”

With the support of PayU and Microsoft’s venture capital division M12, digital assets startup Bakkt has picked up a whopping $300 million in Series B funding. The round, which closed last Friday, also featured participation from Boston Consulting Group, Goldfinch Partners, CMT Digital, Pantera Capital, and Intercontinental Exchange (ICE), Bakkt’s parent company.

“Bakkt launched two years ago with the vision of building trust in and unlocking the value of digital assets for institutions and consumers alike,” company CEO Mike Blandina wrote in a blog post earlier this week. He pointed to the company’s launch last year of its end-to-end regulated market for bitcoin, as well as its institutional bitcoin custody offering, as examples of how the Atlanta, Georgia-based startup has been “focused on delivering that vision.”

These examples will soon also include a new app, slated for a summer launch, that will enable users to maximize the value of a widening variety of digital assets – from loyalty and rewards points to cryptocurrencies.

“Bakkt gives users control over their digital assets,” Blandina wrote. “Whether it’s miles from your favorite airline, loyalty points from the local grocery store, or bitcoin you’ve purchased, the Bakkt app enables you to aggregate all of these assets into a single digital wallet.”

The funding takes the company’s total capital to more than $482 million, and adds to its more than $1 billion valuation. Proceeds from the Series B will be used to help fund parent company ICE’s acquisition of loyalty solutions provider Bridge2 Solutions. Bakkt will leverage Bridge2 Solutions’ partnership network, and its Loyalty Pay offering, to help build and launch products of its own.

Powering more than 4,500 loyalty and incentive programs, including programs for seven out of the top ten financial institutions and two of the largest U.S. airlines, Bakkt was founded in 2018.

UAE-based foreign exchange platform Al Ansari has partnered with financial crime compliance company Pelican. Under the deal, Al Ansari will leverage Pelican’s PelicanSecure, a set of AI-based sanctions screening, anti-money laundering tools, and transaction monitoring solution.

Al Ansari selected PelicanSecure for its compliance accuracy, auditability, processing capacity, and AI-based risk classification approach. Company CEO Mohammad Bitar also noted that, because AI is a core part of Al Ansari’s strategy, Pelican’s use of the enabling technology was a factor in the partnership.

“We selected Pelican as we are convinced they can support us enhancing our anti-money laundering and sanctions compliance frameworks to make them more robust through the use of innovative technology, said Bitar. “This is the start of a long-term partnership with Pelican and we look forward to working closely to streamline our operations around sanction screening, transaction monitoring and AML, both now and in the future.”

Pelican is headquartered in the U.K. and was founded in 1993. Among the company’s clients are ADCB, Standard Chartered Bank, Al Mulla Exchange, Wells Fargo, State Bank of India, and Bank of Barbado.

Al Ansari opened its first branch in 1966 and has since expanded to 190 branches. The company has 2,500 employees that help facilitate 80,000 transfers each day for 2.5 million customers every month. Last year, Al Ansari transferred $11.3 billion (AED 40.5 billion) via its network.

Faster payments for freelance workers? That’s the goal of the new partnership between freelance career platform UnderPinned and payments platform Banked. The two companies are now offering a commission-free service that reduces the amount of time it takes to process a freelancer’s invoice from more than three minutes to less than 30 seconds.

The service works via UnderPinned’s Virtual Office platform, which leverages open banking to retrieve data from invoices and automatically generate bank transfers that can be readily authorized by any U.K. banking provider.

“The number of people choosing freelance work has grown rapidly in recent years, but the infrastructure that supports this type of employment has failed to keep pace with the trend,” said Albert Azis-Clauson, UnderPinned founder and CEO. He highlighted payments as a major pain point. “The traditional process of paying an invoice for a freelancer is extremely clunky and time-consuming,” he said, “and that’s (why) we’ve decided to launch this new service.”

UnderPinned’s Virtual Office provides freelancers and gig economy workers with resources they need to make their jobs easier. The cloud-based hub helps freelancers manage portfolios and projects, invoices, contracts, and more. The Virtual Office also features educational tools and support resources to give freelancers additional assistance with things like finding work spaces to securing insurance. Founded in 2018, and launching its technology earlier this year, UnderPinned already has more than 2,200 users on its platform. The company, which is headquartered in London’s Bethnal Green, is in the final few weeks of its crowdfunding campaign, having raised 93% of its £500,000 ($614,000) target.

In working with Banked, UnderPinned has partnered with a firm that, since its founding in 2017 and launch early last year, has been dedicated to improving the payments process. Banked offers an API platform that fully leverages open banking by connecting to banks to enable payments and authentication of user information with their third party solutions. Based in London, the company includes account top-ups for e-money, trading, and gaming businesses, and payment linking for charities, marketplaces, and crowdfunding platforms among the use cases for its technology.

“We started Banked because we wanted to build a platform that allowed businesses and consumers to do more with their financial lives,” Banked CEO and founder Brad Goodall said. “Our new partnership with Underpinned delivers on this, helping freelancers and businesses save a huge amount of time and ultimately money. It provides a new way of paying invoices that will transform the freelancer experience.”