It seems like each new feature Square adds to its Cash app brings it one step closer to being a de-facto bank account for its users.
Case in point, the app just rolled out support for ACH direct deposits, meaning users can now get their paycheck or other deposits put directly into their Cash app balance.
Like other features in the peer-to-peer payments app setting up direct deposits is almost too simple. After accepting a disclosure you’re given an account number and routing number, which is all an employer needs to start making direct deposits. Users get a notification when deposits hit their account, and all funds get added to their normal Cash app balance – meaning it can be sent to a friend, spent using a debit card, used to buy bitcoin or withdrawn to another account.
This feature combined with the Cash app’s debit card now means that the app can essentially provide all the basic functions of a bank account, assuming you don’t need to deposit checks or do complex things like wire transfers.
Don’t be surprised to see younger users who are already using the Cash app just use this direct deposit feature instead of opening a traditional bank account when they start their first job. Plus, features like these could also make the app useful for people living in underbanked communities or who those just feel generally underserved (or overcharged) by traditional financial institutions.
Since Square doesn’t (yet) have a bank charter, they’ve had to get creative by partnering with banks to build features like their debit card and direct deposits. While their debit card is issued by Sutton Bank it seems like the direct deposit feature is being powered by Lincoln Savings Bank, which is giving Cash app users a routing number and a new account number to use for deposits. Partnerships like these between FinTech companies and FDIC-insured banks are common, considering how difficult it is for a technology company to get its own bank charter.