Will Square Be the Next P2P Provider to Get Into Banking?

At Recode’s annual Code Commerce conference this week, Square Chief Financial Officer Sarah Friar indicated that the company is considering “lots of [banking-related] ideas,” including savings products and investment services. According to a article:

“Anything you do today with a bank account, you should look to the Cash App to begin to emulate more and more of that,” Friar said, adding that the amount of money the average customer was storing on the app is what led to the discussions. “It’s definitely a big balance. And we’re starting to think about, are there other things we could do for our customers there? Maybe help them with their savings. How can we help them make their money work for them?”

Does Anyone Want to Bank with Square?

Quite possibly. When asked if they would use a general use debit card from various P2P providers, 11% of younger Millennials (ages 21 to 29), and 14% of older Millennials (ages 30 to 37) said that not only would they be very likely to use a Square debit card, they'd might even use it as their primary card. In addition, nearly a quarter of the 20-somethings and a third of the 30-somethings said they would be "somewhat likely" to use it.

Friar's comments about the amount of money Square's users keep in their accounts provide more evidence of the deposit displacement theory that consumers are displacing, or diverting, funds away from traditional checking accounts into other accounts. The result is the diminishing of checking accounts' importance in consumers' financial lives.

Mid-size banks and credit unions should start to explore strategies to get their P2P-using (i.e., Venmo, Square, Apple Pay) customers and members to move money back to their checking account.

Ron Shevlin
Director of Research
Cornerstone Advisors