Will the USA See a Surge of FinTech Banks Launch this Year?

Will the USA See a Surge of FinTech Banks Launch this Year?

Chris Skinner

Chairman at The Financial Services Club

Views 363

Will the USA See a Surge of FinTech Banks Launch this Year?

10.01.2017 01:30 pm

I write so much that I sometimes forget what I’ve written, where.  For example, Mark Sievert of Silicon Valley Bank made an interesting comment on my predictions for 2017:

Happy New Year Chris! One topic I am not hearing much about is the OCC December decision to offer Federal Charters to Fintech firms. http://bit.ly/OCCFintech. Many larger and some smaller have targeted the Fintech niche for transaction sales growth, Cross River has taken it to the next level. What am I missing that if a SoFi or Stripe chooses the federal Charter route that doesn’t profoundly change the fundamentals re traditional banks and their survival? How does that not make a top ten list?…

I read that, and thought doesn’t he read my blog?  Well, as I’ve met Mark a few times, I know he does.  So what was I missing?

Ah!  I wrote about this on one of my other blogs, in this case FinXTech.

FinXTech was launched last year for the US markets by Bank Director, and I’m part of their Advisory Group.   The aim of FinXTech is to provide authoritative, relevant and trusted content to:

  • Fintech companies who view banks as potentially valuable channels or distribution partners;
  • Banks looking to grow and/or innovate with fintech companies’ help and support; and
  • Institutional investors, venture capitalists, state & federal regulators, government officials and academicians helping to shape the future of banking.

In my role as part of the Advisory Board I write a couple of features each month and, at the end of December, wrote this one.  Enjoy!

Proposed Fintech Charter Could Sprout Waves of U.S. Digital Banks

I’ve been critical of the U.S. regulators for some time, as the complex mixture of different state, national and federal licensing boards makes it difficult for fintech innovations to break through. This is pretty obvious when you think that there is not a single new digital bank launched in the U.S., when there are dozens across Europe. There, you have N26, Solaris and Fidor in Germany; Knab and Bunq in the Netherlands; and a whole range of new startups in the U.K. including Atom, Starling, Monzo, Loot and Tide. Can you name a new U.S. digital bank?

Well, you may well be naming a few quite soon. Recognizing the innovation in the EU and U.K., the Office of the Comptroller of the Currency (OCC) has announced that it will support fintech innovations from neobanks to special banks, and creating breakthrough possibilities for firms in digital currencies like bitcoin. This is pretty radical, and overrides a lot of the barriers to breaking into U.S. banking today if approved, as the idea is currently under consultation.

The idea is that fintech startups could get licensed by the OCC under the National Bank Act and given a special purpose national bank charter. This is a license used by several firms already, including some trust and credit card banks, and would allow fintech firms to operate nationally without all the overhead of dealing with state regulations. That is a serious breakthrough for American markets and fintech companies if implemented, as one of the reason that you don’t have national neobanks startups in the U.S. is the complex spaghetti of regulations and authorities you have to deal with to get started.

Financial Innovation Now (FIN)—a public policy coalition of Amazon, Apple, Google, Intuit and PayPal—has been one of the key groups applying pressure to the OCC for these reforms. Back in the summer, the consortia produced a fascinating report on the complexity of U.S. financial regulations. As cited by these internet giants, compliance requirements constitute a significant market barrier, particularly for new entrants, and can serve to protect incumbent providers from new competition. Obviously, companies like Amazon and their brethren are listened to and the OCC has responded. Equally, FIN has been calling on the new administration to focus on fintech. At the end of November, the group called on President-elect Trump to embrace technology’s potential to make financial services better for American consumers and small businesses in a letter.

A key paragraph in that letter stated:

Technology and the internet are changing the way consumers and small businesses manage money, access capital, and grow commerce. Financial regulators around the world are paying close attention to this transformation and actively working to adopt policies that attract investment and create jobs in these new services, ultimately benefiting their own consumers and businesses. While America’s financial regulators and Congress have recognized this potential on a bipartisan basis, more leadership and federal coordination is necessary.

What FIN is getting at in this letter is that some markets—Germany, Britain and Singapore in particular—are a hotbed of financial innovation through technology. Does the U.S. want to fall behind? I don’t think so, and Amazon, Apple, Google, Intuit and PayPal are on the campaign trail to make sure it doesn’t. With the OCC and, hopefully, an open ear from a new president, it will be fascinating to see just how radical 2017 will be.

Latest blogs

Nish Kotecha and Noslen Suárez PhD Finboot

How blockchain can help us have trust in the food we eat

Today’s food supply chains are global, connected and generally efficient, but the COVID-19 pandemic has shone a spotlight on areas of weakness. The urgent need for robust and resilient systems and processes has been brought sharply into focus, and Read more »

Chris Miller RSA Security

Back to Normality: Five Steps to Stay Resilient After Disruption

The financial services sector has lived through many global disruptions, but the nature of recent events has put an unprecedented strain on operational resilience; from needing to ensure critical functions could continue with skeleton staff and Read more »

TYRON JONES n/a

How Technology Has Disrupted the Used Car Buying Experience

We’ve seen many fields change rapidly as a result of the integration of modern technological advancements over the last couple of decades. And it looks like more is coming on the horizon as well, judging by current trends. One of the markets that Read more »

Shuvo G. Roy Mphasis

Reboot 1.0: How financial services technology can enable the supply chain to support a post-lockdown boom

Ground control and Captain Tom When veteran Captain Tom Moore decided to walk one hundred laps of his garden before his 100th birthday to raise funds to support NHS heroes battling Covid-19 from the frontline, he never imagined that he would Read more »

Lisa Gutu Salt Edge

Building a PSD2 compliant channel: challenges and opportunities for financial institutions

PSD2 obliges ASPSPs including banks, e-wallets, prepaid cards and other companies that offer payment accounts to provide at least one channel for secure communication with third party providers (TPP). Even neobanks or e-money institutions, including Read more »

Related Blogs

Ian Bradbury Fujitsu

Britain remains the most attractive country in Europe for financial services investment

Recently EY has revealed that Britain remains by far the most attractive country in Europe for financial services investment. According to the EY research, the UK recorded more than double the number of projects of any other European country, with Read more »

Will Hurst Monevo

Fintech vs traditional banking

The financial services competitive landscape has evolved in recent years and it’s clear that fintechs have certainly disrupted traditional banks. Fintechs include any financial tech company that serves any of the following areas; lending, blockchain Read more »

Ray Brash PPS

“Repair the roof while the sun is shining” – why fintechs were COVID ready

During his 1962 State of the Union Address, John F. Kennedy declared: “The best time to repair the roof is when the sun is shining”. While the original philosophy behind the sentiment wasn’t intended for organisations, per se, it’s an apt quote when Read more »

Koen Vanpraet PXP Financial

Top Five Fintech Predictions for 2020 and Beyond

The last decade has been incredible for fintech, with advancements being made across a range of areas including retail banking, wealth management and, in particular, payments. To give some perspective, in 2019 we saw 64% of consumers worldwide using Read more »

Bobby Gill GCWealth
Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel