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Only a year has passed since Square got the green light from regulators to operate the bank it launched on Monday, but meanwhile, bitcoin has become a key driver of its revenue.
In the fourth quarter, Bitcoin trading contributed more more than half of the company’s overall revenue – and that will make a big difference as the new Salt Lake City-based Square Financial Services brings its products to market.
Square is best known for providing mobile point of sale and other payment services to merchants; Bitcoin trading stems from the company’s experimental approach to its Cash app, its only consumer product. This model has allowed Square to profit even as the pandemic weighed on merchants who rely on its service.
By adding its own banking subsidiary, Square will be able to react even more quickly to changes in the market.
What makes the setup so flexible is that “Square can think of term loans and savings products without having to go through partnerships,” said Alenka Grealish, senior analyst at Celent.
Square now operates a “closed loop” model in which it builds its own infrastructure, Grealish said. It’s different from other payment-driven fintechs that work with third parties to streamline existing rails. Square will always sell loans to third party investors.
The bank will allow Square to bring the bank to underserved markets and will not compete directly with …
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