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No Banking Charter? No Problem. Fintechs Team Up With Small-Town Banks

Partnerships between tech companies and traditional banks are a key force behind the financial technology boom.

By Julie Verhage | September 24, 2019 at 02:00 PM
Using Square and other digital payment platforms. Using Square and other digital payment platforms. (Source: Shutterstock)

Customers of Square Inc., the Silicon Valley payments behemoth, might assume that the cash they send to friends on the platform is housed in a glassy building in Silicon Valley, tended to by hoodie-clad tech workers. Actually, that money is more likely to be sitting in a 117-year-old community bank in Iowa.

Partnerships between high-flying tech companies and traditional banks, many of them tiny by comparison, are a key force behind the financial technology boom. Because virtually no tech companies have the license required to perform banking services, many of them partner with existing banks to offer a suite of services including checking accounts, credit cards and the back-end and regulatory work the tech companies aren’t equipped—or allowed—to handle.

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