Payment-processing company already offers working-capital loans to small businesses
Square plans to launch its first credit card, teaming up with American Express Co. as it dives deeper into banking services.
The two companies announced Wednesday their intent to build a credit card for small businesses, though they didn’t specify when the card would launch and promised that more details would emerge next year.
Square, which is the merchant-focused business within Jack Dorsey’s Block Inc. SQ, -5.22%, has moved far beyond payment-processing capabilities for small businesses, including through seller financing and debit cards. Credit cards are “an evolution of that” and a chance to “go a little more upmarket,” according to Luke Voiles, the general manager of Square Banking.
Voiles sees the planned credit card as a way to cater to so-called thin-file merchants who might not be able to get credit otherwise. Square has long offered working-capital loans to its sellers, using the information it sees about their card-processing volumes to project future revenue and performance, which can then inform lending decisions.
Customers “may be thin-file … but it doesn’t matter if we can project what the next 12 months look like,” since Square is “in the flow of data and money,” Voiles told MarketWatch. The company “can use the same underwriting to give lines with credit cards,” he said.
Square has “a lot of designers and product folks” who can help create a compelling “front-end experience,” he continued, while Amex AXP, -0.86% brings back-end capabilities. As Square gets into more banking services, Voiles sees a future where “Square may be the first place businesses come to understand their working capital and cash flow.”
For Amex, the work with Square aligns with a recent strategy of modernizing its network and embracing partnerships with financial-technology companies that want to “co-create” cards, according to Mohammed Badi, president of the American Express Network.
“It does reinforce the message we’ve been sharing in the industry, which is that the Amex network is open for business with fintechs,” he said in an interview.
Badi noted that the credit-card arrangement marks an extension of earlier work with Square around card acceptance and small-business marketing.