Celtic Bank Loses Square Capital
Celtic Bank
The important shift was that one of Celtic’s biggest fintech customers stopped needing Celtic to be the lender. Square had used Celtic as the regulated bank behind merchant cash advances and SMB loans, then Square Financial Services began banking operations on March 1, 2021 and became the primary provider of financing for Square sellers. That moved origination, balance sheet economics, and product control inside Block, leaving Celtic with a large revenue hole that is hard to replace one partner at a time.
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In practice, Celtic sat behind the Square interface while Square owned distribution. A merchant saw an offer inside Square, accepted in a few clicks, and repaid through a fixed share of daily card sales, but Celtic was the legal issuer in the loan documents. That meant Celtic supplied the charter and compliance layer, while Square owned the customer and data.
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This is the core risk in sponsor bank lending. A successful fintech can internalize the bank function once it has enough scale, data, and regulatory readiness. Celtic’s own risk profile highlights this partner concentration problem, and the same pattern explains why banks like Cross River and Lead keep broadening product scope and partner mix instead of leaning on one breakout client.
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The comparison point is Cross River. Cross River still powers a wider set of lending, payments, and deposit programs across more than 80 fintech partners, which helps cushion the loss or slowdown of any single relationship. Celtic is more concentrated in embedded lending, so losing a flagship program like Square Capital has a more visible effect on loan balances and interest income.
Going forward, sponsor banks will keep moving toward a barbell. The strongest fintechs will seek their own charters or deeper direct bank control, while smaller and midstage platforms will still need banks like Celtic. That pushes Celtic to win many more lending programs, expand into adjacent products, and make itself harder to displace before partners reach Block’s level of scale.