The purpose of the unit, Square Financial Services, would be to offer loans and deposit accounts to small businesses.
If Squares application is approved, it will not technically be a bank, it will instead be an industrial-loan company.
From the perspective of the consumer, these two types of institutions are functionally equivalent, as they are both empowered to make loans and accept deposits insured by the Federal Deposit Insurance Corporation (FDIC).
The biggest difference from Squares perspective, however, is that an industrial loan company can be owned and controlled by a corporation that does things other than banking, while a traditional charter does not permit this.
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