The deal will create “a transactions giant that will battle banks and tech firms" in the fast-growing "buy now, pay later" market.
The suite of financial products are designed to help small business owners manage their cash flow.
CEO Jack Dorsey said the business will be dedicated to “decentralized financial services” using bitcoin.
The fintech company's CFO Amrita Ahuja said bringing banking capability in-house will enable the company to “operate more nimbly.”
The fintech company began its bid for a banking charter over two years ago.
Twitter shares jumped on reports that Elliott Management is seeking to replace Jack Dorsey because he also runs Square.
Slower sales growth also weighed on the stock but "new products and services can provide a second wind to growth as the year progresses."
“I believe Square is building the most innovative commerce ecosystem for sellers and consumers," Ahuja says.
An industrial loan charter would enable Square to provide loans and other financial services directly to merchants.
Sarah Friar's six years at Square included an IPO — an experience she may repeat as CEO of social network Nextdoor.
Twitter CEO Jack Dorsey, who founded the company, said he was a "huge fan" of bitcoin but the move was contentious internally.
The payments company's top-line growth was driven by a 31% increase in gross payment volume to $17.4 billion.
