FinTech

What Square’s New Debit Card Could Mean for FinTech

A few weeks after Square CEO Jack Dorsey teased some sort of custom Visa card on Twitter (A.K.A. the other company he runs these days), select Square Cash customers have begun receiving invitations to order their own Square Cash debit card. According to reports the cards are linked to users’ Square Cash balance and are accepted where Visa cards are. Adding a bit of fun, users can also select a signature to display in the bottom right corner of the card — although, as Recode notes, the company screens the submitted designs for inappropriate words or drawings.

So why would a FinTech company like Square want to create a physical debit card? After all, isn’t that kind of step back for the type of company that’s supposed to be creating the future of finance? That may be true but, in a roundabout way, Square’s embrace of “old” technology could actually help FinTech adoption down the line and even initiate a sea change in the banking industry.

Think of it this way: right now peer to peer money apps like Square Cash or Venmo are very popular among younger users. However that same demographic may not have the time to wait while they transfer their balance to their bank accounts for spending. So while Square’s move is essentially an admission that mobile payments and other technologies still aren’t as ubiquitous as we might like to think, it could potentially bring in new users who may have been hesitant to use the service beforehand. Furthermore it could give the app a leg up in an increasingly crowded space (especially with rumors that Apple is looking to introduce their own P2P cash-sending service). Really, if Square’s gamble does pay off, it could actually help bridge the gap between current credit card technology and the next generation — be it mobile payments or beyond.

What’s also interesting about Square’s debit card initiative is that it co-opts a function that had previously been more or less exclusive to banks. In fact, if Square Cash were to add the ability to deposit checks straight into the app, it’s not hard to imagine a scenario where users might abandon their banking institution all together in favor of something cheaper, more transparent, and more in line with their limited banking needs. That said it may be difficult for one company to streamline all of the functions of a bank without feeling the bloat that weighs down traditional banks. Instead perhaps partnerships could be formed, much the way banks are currently looking to FinTechs to supplement their products. For example maybe Square Cash becomes a hub for transactional needs — replacing regular checking and savings accounts — while an online lender such as Able Lending could fulfill loan needs and a company like Acorns manages investments. Having a collection of FinTechs come together in such a manner may sound a bit far fetched now but the idea itself is certainly possible.

While it’s far too early to know for sure how Square’s debit card idea will perform (especially with the initiative still being invitation only), this seemingly regressive approach could actually prove to be a breakthrough for FinTech. If the bulk of customers aren’t quite ready to jump on board with new financial and payment technologies, it makes sense that introducing an intermediary step could aid adoption and eventually lead consumers to “take off the training wheels” as it were. So could this be the beginning of a new banking revolution? Never say never.

Other Articles by Jonathan Dyer