Fintech: Why Fintechs are Racing for Bank Charters again
After a Decade of Renting, Fintech Wants to Own
Hi Fintech Futurists —
Bank charter applications in the US reached their highest level in five years. Most applications come from the fintech sector, but the underlying segments vary widely. Companies range from neobanks like Nubank, to payments players like Checkout.com, stablecoin issuers like Circle, and crypto exchange Coinbase. This week we dig into the strategic drivers behind this trend, how charters add value for fintechs, and why banks are not all created equally.
Today’s agenda below.
FINTECH: The race for Bank charters reaches 5-year high
ANALYSIS: Our 3 Trends to Watch in Fintech and AI for 2026 (link here)
CURATED UPDATES: Paytech, Neobanks, Lending, Digital Investing
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The race for Bank charters reaches 5-year high
Obtaining banking charters wasn’t always rare. At their peak in 1999, there were 270 new banks going live in the US in a single year. That’s three times greater than the total number of new banks formed between 2010-2025.
One of the main reasons for this is the stark change in regulations before and after the financial crisis.
Prior to the crash, the banking sector enjoyed two decades of expansion, fuelled by relatively higher interest rates and deregulation — e.g. the Depository Institutions Deregulation and Monetary Control Act (1980). This enabled banks to compete on price, products, and geography.
A common private equity play was to fund initial equity in a small community bank (<$50MM), obtain a de novo charter within 12 months, and grow the book aggressively before exiting to a larger regional bank. For example, Hibernia focused on acquiring small community banks to grow its book in Louisiana and Texas. By 2002, it had grown to $15.8 billion in assets and 255 branches before selling to Capital One for $5.4B.
After the crash, drivers of new banking applications took a completel U-turn.
Landmark legislation under the Dodd-Frank Act (2010) and Basel III enforced strict supervision and capital requirements on the banking sector, while the subsequent era of zero interest rates hurt bank profitability. The aforementioned private equity play now required higher upfront equity, more headcount, and faced significant growth restrictions, rendering it uneconomical.
The influx of fintech companies that followed and unbundled the traditional banking model largely avoided applying for US banking charters altogether. Instead, they partnered with smaller regional banks to offer deposits, FDIC insurance, and lending products.
This was a win-win.
The fintechs offered competitive banking products without the regulatory headache, while banks gained access to fast-growing digital distribution. The segment consisting of Cross River, Webbank, Celtic Bank and others reported RoE significantly above the industry average 10.8% in the late 2010s. At least for a time.
So what’s changed?
In 2025, applications for banking charters have picked up substantially and reached their highest in over a decade (excl. 2020). The same drivers that discouraged charter applications post-GFC are beginning to turn again.
Let’s take bank profitability. The hike in interest rates since the pandemic has significantly boosted net income across the sector. Data from the FDIC shows that US banking institutions netted $70B in quarterly income in 2025, up from $40B in 2015.
Fintechs have likewise begun to earn a significant portion of their revenues from interest income even when their core competency is outside of digital banking. For example, interest income made up over 25% of total revenue for payments-focused Revolut in 2024 and 30%+ for trading-focused Robinhood. Wealthfront, which was supposed to be a roboadvisor, makes over 50% of its revenue from net income.
At a certain critical mass, the revenue split and increased counterparty risk (i.e. see Synapse Bank) of dealing with a partner bank stops making strategic sense.
Markets have also responded with an outstanding turnaround in share price performance for major banks. The Euro Stoxx index of European Banks has outperformed the S&P500 in the last 12 months, while UK Banks have even outperformed the AI rally led by the Mag 7 stocks over 24 months.
The prospect of a banking charter could therefore again prove accretive to enterprise value.
A shifting regulatory environment is another reason for the rise in applications. Both the OCC and FDIC have indicated favourable conditions for fintechs to pursue charters. Firms feel they can strike while the iron is hot with the current administration, expecting faster successful approvals. In September, the head of the OCC stated:
“I have recently elevated the stature of our chartering and licensing function… we will no longer have a de facto “no” policy” – Comptroller of the Currency Jonathan V. Gould (September 2025)
Different types of charters grant different privileges with different levels of oversight and capital requirements. The value of a particular charter for fintechs varies by use case. The latest string of applications typically fall in three buckets:
National Bank: This is a fully fledged banking charter as applied for by NuBank. The pros are ability to re-invest deposits for lending and full access to federal banking systems such as FDIC and FedNow. The cons are strict capital requirements and regulation. This trade-off makes strategic sense for firms with an established lending portfolio and deposit base e.g. Klarna, Affirm as it enables significantly lower costs of capital of 2-4% vs. 7%.
Trust Bank: Limited to custody and payments and the most popular option among applicants incl. Circle, Wise, and Coinbase. The pros are access to the federal payments system which enables direct settlement of stablecoin minting/redeeming as well as less regulatory oversight. The cons are limitations on banking activities like lending and deposit-taking.
Industrial Loan Companies: Typical among large industrial sectors such as carmakers e.g. Ford and Nissan. The pros are the ability to own an FDIC-insured deposit taking bank but is limited in its scope of activities. Both Bread and Square have ILC charters.
Below is an extensive list of the fintechs currently applying.
One driver of applications for Trust Banks in particular is the recent Genius Act, which enables banks to issue stablecoins. Beyond access to payment rails, this creates a path for existing issuers like Ripple, Circle, and Paxos to diversify into other banking activities in the future while establishing credibility.
Broadly speaking, we expect the rise in potential bank challengers to pose increased competition for the incumbents and offer more viable alternatives for consumers. Big banks have been quick to voice their frustration. The ICBA, an independent group of banks, have pointed out deficiencies in new applications, most recently for Coinbase.
More interesting will be to see which fintechs will successfully use their charters to unlock new revenue that meaningfully offsets the regulatory and capital burden. We think Klarna, Bunq, and Nubank are best positioned with existing deposit and loan businesses.
👑 Related Coverage 👑
Long Take: Our 3 Trends to Watch in Fintech and AI for 2026
We discuss how 2026 will be a defining year for fintech, set against a backdrop of geopolitical chaos, a weakening dollar, and exponential AI adoption. We explore how a wave of fintech IPOs and enterprise implementations — from companies like Stripe, Plaid, and Revolut — will test market sentiment and operational maturity.
The next frontier lies in “robot money” and AI agents managing commercial workflows, as evidenced by experimental efforts like Andon Labs’ AI-run vending machine and Facebook’s $2B Manus acquisition. As AI trends toward recursive self-organization and software creation costs approach zero, the real opportunity lies in building operating systems for finance and commerce that can manage networks of autonomous agents.
Curated Updates
Here are the rest of the updates hitting our radar.
Paytech
⭐ Stablecoin firm Rain valued at $1.95 billion in latest fundraise - Reuters
Barclays Invests in Crypto Connectivity Startup Ubyx - Finovate
Neobanks
Walmart-backed fintech OnePay is bringing crypto to its banking app - CNBC
Fintech Mercury applies for OCC bank charter - Banking Dive
Monzo secures EU banking licence to launch in Europe - Fintech Global
Lending
Digital Investing
⭐ Standard Chartered prepares crypto prime brokerage push - The Block
Fireblocks to acquire Web3 data and reporting fintech Tres Finance - Fintech Futures
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Very useful !!!
A great example of this strategy failing is Varo. They have a US charter, but haven't ever attracted enough deposits to have a meaningful base for lending, which is why they're slowly running out of money.