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Why Square Stock Popped Today

By Joe Tenebruso – Jul 21, 2021 at 2:56PM

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The fintech leader is making a big move into banking.

What happened

Shares of Square (SQ -3.17%) rose on Wednesday after the financial services company announced a slate of new banking products. As of 2:35 p.m. EDT, Square's stock price was up more than 4%.

So what

Square Banking is geared toward helping small businesses better manage their cash flow. Square Banking's initial products will consist of Square Checking, Square Savings, and a rebranding of the company's Square Capital business financing operations, which will now be known as Square Loans.

"Small businesses are the heartbeat of our communities and our economy," Square executive Christina Riechers said in a press release. "From our earliest days, Square has focused on building easy-to-use tools and services to empower entrepreneurs to succeed on their own terms."

A small business owner is looking at financial charts.

Square wants to make life easier for its merchant customers. Image source: Getty Images.

These products will be tied into Square's existing ecosystem of seller solutions, such as Square Payroll. The goal is to give business owners a single, unified view of their financial operations.

Convenience is another goal. Square Savings will allow merchants to easily set aside a percentage of every sale they make on Square's platform. Square Checking will provide sellers with instant access to the funds they earn using Square's card payment processing tools. And Square Loans will help to provide small businesses with financing they might not otherwise obtain from traditional lending institutions. 

Now what

Between its merchant customers and massively popular Cash App, Square will have a large installed base of potential clients to market its new banking products to. Square, in turn, could quickly become a powerful force in the banking industry.

Investors can expect to hear more about Square's new banking strategy when the company reports earnings on Aug. 5. 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Square. The Motley Fool has a disclosure policy.

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