The Federal Deposit Insurance Corporation (FDIC) has approved the deposit insurance application submitted by Nelnet Bank and Square Financial to create a de novo bank.
Both the companies are granted with industrial loan company charters which allow non-banks to originate loans and collect insured deposits.
This is the first time FDIC has granted such licenses in more than a decade.
As fully chartered banks, Nelnet will originate private student loans and other consumer loans, whereas Square will originate commercial loans to merchants.
Square and internet-only bank Nelnet will operate from their main offices located in Salt Lake City, Utah.
Established in 1978 to serve federal student loans, Nelnet has diversified its business activities to include education technology and payment processing services.
Nelnet Bank president and CEO Andrea Moss said: “Our next steps will prepare us to open Nelnet Bank, including fully developing our product suite, technology systems, and operational processes and controls.
“While we have a lot of work to do, we are excited to launch Nelnet Bank and begin fulfilling our purpose of serving students and families.”
Formed in 2009, Square enables businesses to accept card payments, point-of-sale payments, financing, and other services.
Square Capital lead and Square Financial executive chairwoman Jacqueline Reses said: “Square Capital is uniquely positioned to build a bridge between the financial system and the underserved.
“We’re now focused on the work ahead to buildout Square Financial Services and open our bank to small business customers.”
Subject to the receipt of approval from the Utah Department of Financial Institutions (UDFI), both the companies are expected to launch their banks in 2021.