Payment solutions provider Square is trialling a small and short-term loan feature in its Cash App.
The firm, founded by Twitter co-founder and CEO Jack Dorsey, has set up a the small test of about 1,000 participants to see how it would work to be able to offer loans of between $20 and $200.Each loan would have to be paid back within four weeks at a flat 5% fee.
Failure to pay the loan within that period would first result in a one-week grace period before Square begin to add 1.25% non-compounding interest each week. Users also won’t be able to take out an additional loan if they have failed to pay old ones back in the past.
“We are always testing new features in Cash App, and recently began testing the ability to borrow money with about 1,000 Cash App customers,” a company spokesperson said in a statement seen by TechCrunch, which broke the story. “We look forward to hearing their feedback and learning from this experiment.”
The news comes months after the Federal Deposit Insurance Corporation (FDIC) board voted to conditionally approve the FinTech’s application for deposit insurance for its Industrial Loan Company bank charter.
Following the approval in March, the company said it was planning to open a bank in 2021.
