Square, the fintech startup headed by Twitter founder Jack Dorsey, has finally made an official application with the Federal Deposit Insurance Corporation to become an Industrial Loan Company (ILC).
The new bank, Wall Street Journal reports, will be named Square Financial Services Inc. Its acting CEO will be Lewis Goodwin, who recently joined Square after serving as chief executive of Green Dot Bank. This license means that Square will now be able to offer loans to its customers on its own, and not depend on a partner to help it do it. Jack Dorsey tweeted, “Proud we’ve lent out over $1.8 billion to over 140,000 small businesses throughout the US. Average loan size: $6,000.”
The ILCs have the authority to carry out banking services while also continue providing other non-financial commercial services. For Square, this translates into ability to continue operations of its food delivery business Caviar as well as the provision to sell payment terminals. Traditional bank holding companies, however, are forbidden from offering any non-financial services.
For obvious reasons, ILCs are controversial. A moratorium was placed on them under the Dodd Frank Act but was later lifted in 2014. Since then retailer WalMart applied for an ILC but its application was rejected. Earlier this year online lending startup SoFi also applied for an ILC and the application is still pending.