Financial technology (Fintech) Companies and crypto companies are increasingly applying for bank charters to expand the business and reduce loan costs. A bank charter gives these companies legitimacy in the eyes of customers and supervisory authorities, while lowering the costs of doing business by allowing them to use deposits.
With the Trump administration that signals a more business-friendly strategy, fintech companies are cautiously optimistic when it comes to getting bank charters. Industry experts predict that a liberal regime will encourage competition and open opportunities for more fintechs to get bank status.
Why is Fintech’s bank charter looking for?
A bank charter provides several benefits to fintech companies, including:
Lower capital cost: A statute allows fintech companies to access deposits, which reduces their dependence on costly venture capital or borrowing of high interest rates.
Increased legitimacy: Becoming a licensed bank increases consumer confidence and the credibility of the regulation and attracts more customers and investors.
Extended market range: Bank charter allows fintechs to offer a wider range of financial services, which improves their competitive position.
According to Carleton Goss, a partner at Hunton Andrews Kurth, fintech companies that apply for charter can significantly lower their loan costs, making it easier to grow and scale their companies.
The Trump administration’s PRO-growth setting
The recent increase in charter applications follows signals from the Trump administration that indicates a desire to facilitate regulations and support innovation in financial services.
Nathan Stovall, head of research on financial institutions at the S&P Global Market Intelligence, noted that during Trump’s first term, there was an increase in charter applications. Industry experts expect a similar wave of applications under Trump’s current administration.
Federal Reserve -Governor Michelle Bowman, nominated by Trump as Vice President of Surveillance, has advocated faster bank charters approvals to encourage competition and innovation.
In addition, Travis Hill, acting chairman of the Federal Deposit Insurance Corporation (FDIC), has publicly stated that the agency would promote charter applications to ensure a healthy pipeline of new participants in the banking sector.
Regulatory challenges that fintech charters face
Despite the potential benefits, fintech companies face several challenges when it comes to getting bank charters.
High costs and compliance requirements
Establishing a bank usually requires between $ 20 million and $ 50 million in initial capital, according to legal experts. In addition, compliance with laws against money laundering (AML) and the Banking Secrecy Act mean significant obstacles to prospective fintech banks.
Slow approval process
Historically, approvals of bank charter have been slow, with applications that sometimes take years to process. Between 2010 and 2023, only an average of five bank charter applications was approved annually compared with 144 per year between 2000 and 2007.
Since fintech companies apply for charter, supervisory authorities remain cautious, and emphasize the need for thorough review to maintain financial stability. Nigel Moden, global banking and capital market leaders at EY, pointed out that while regulatory processes remain rigorous, there are hopes that the turnaround time for applications will be improved during the current administration.
Latest charter approval signals growing momentum
A remarkable sign of speed came when Smartbiz, a fintech company, received approval to acquire Centust Bank, a Chicago-based community bank. This acquisition gave Smartbiz a national bank charter that marked the first approval of its kind since 2021.
The insiders of the industry see this approval as a positive sign that more fintechs can follow suit, paves the way for greater competition and innovation in the banking sector.
Fintechs and crypto companies that see bank status
Several fintech and crypto companies have shown interest in getting bank charters to diversify their offers and regulating Rental. Industry experts highlight that these companies want to “get before the curve” by securing licenses that can reduce operating costs and provide a competitive advantage.
Alexandra Steinberg Barrage, a partner at Troutman Pepper Locke, noted that many fintech clients are “cautiously optimistic” about the prospect of securing bank charters in the current regulatory environment.
Impact on banking industry competition
If more fintechs successfully receive bank charters, it can reshape the landscape for financial services by introducing specialized banks that satisfy specific customer segments and regions. This increased competition could benefit consumers by lowering costs and promoting innovation.
However, experts warn that although fintechs can inject competition in the banking sector, the number of US banks is still expected to decrease due to an expected recovery in mergers and acquisitions among regional lenders.
Outlook for Fintech Bank Charters 2025
As Fintech And crypto companies navigate in the charter application process, industry observers remain optimistic about the future. With the Trump administration’s pro-business attitude and supervisory authorities that signal a desire to facilitate innovation, fintech companies have a unique opportunity to expand their influence in the financial sector.
While challenges remain, including high capital requirements and strict regulatory reviews, the potential benefits of a bank charter – slower capital costs, increased legitimacy and wider market range – make an attractive alternative for fintechs that want to secure a stronger foothold in the industry.
Image: Megapixl @ peshkova
