New Type of Banking Licence to Serve FinTech Startups

new finTech startup banking

US FinTech Sector Set to Grow as OCC Provides Avenue to Test

The OCC (Office of the Comptroller of the Currency), which is a sub-branch of the U.S. Department of Treasury, last year stated that it would look into granting financial technology (FinTech) companies with Special Purpose National Bank Charters. Since that declaration, it has now begun to actively engage players in the industry to explore the topic. This move has the potential to lower the existent barriers keeping these companies, that wish to institute innovative ideas within the financial services industry, from moving forward.  


Startups facilitating banking, borrowing, and money management online as consumers shift away from traditional brick and mortar banking institutions stand to gain from the establishment of avenues for them to test their products.

In the global competitive interests of the U.S., regulators need to understand just how technology and banking communities are gradually evolving and converging. FinTech businesses are today seeking for a regulatory platform that will allow them to experiment and innovate.

Providing FinTech firms with a federal regulatory remedy such as Special Purpose National Bank Charters will serve as a clear indication that things are moving in the right direction for the market. However, the OCC still needs to facilitate regulatory flexibility if they intend to equip the next generation of banking with the tools they need.


Should FinTech Companies Be Regulated As Banks?

According to the members of the Chamber of Digital Commerce, which is the world’s biggest trade association representing the blockchain and digital industry, FinTech companies stand to benefit a whole lot from Federal Charters. However, on the surface, a majority of the Chamber’s members don’t offer services that fit perfectly into the various categories contained in the core banking functions.
As a result, the OCC was also recently asked to offer guidance on what was the modern day equivalent of core banking functions prior to companies submitting applications.


The Potential of OCC FinTech Charters Transforming the Financial Landscape

The main benefits of the Special Purpose National Bank Charters are to provide uniform regulations, supervisions, authority, and standards for up and coming financial technology companies so that they can operate on a national basis. Such charters will also provide qualifying business with a more defined path when it comes to market entry together with a much quicker route to profitability and eventually success. This aspect will also assist the industry in accommodating an ever-expanding and evolving behavioral pattern when it comes to managing and maintaining financial duties, particularly among younger U.S. consumers who are distancing themselves from the traditional banking services utilized by their parents and grandparents.


A Bright Future for Fintech

Fintech is an exciting and innovative sector of the banking world which shows a lot of promise as more and more of our lives move online, where we can quickly and easily get the information and resources we need to accelerate small business, home loans, and more. Continued work to develop an accelerated path for fintech startups will enable faster growth and timely delivery of these potentially game-changing online services to consumers.

Posted February 8, 2017 by & filed under FinTech, News.