Regulators to allow fintech companies to become national banks

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FEDERAL REGULATORS said Tuesday fintech companies, such as those providing digital financial services via smartphones and other technologies, will be allowed to seek federal banking charters to provide banking services on a national scale. / BLOOMBERG NEWS FILE PHOTO/SEONGJOON CHO

PROVIDENCE – The burgeoning financial technology industry scored a big victory Tuesday when federal regulators announced that so-called “fintech” companies will be allowed to become national banks.

The U.S. Office of the Comptroller of the Currency, or OCC, announced it will start accepting applications for special-purpose national bank charters from nondepository financial technology companies engaged in banking.

Prior to the decision, fintech companies only could be licensed as banks on the state level, and they would need approval from each state in which they sought to operate as a bank.

“This makes it easier for them to operate on a national level,” OCC spokesman Bryan Hubbard told Providence Business News.

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Fintech is a new industry that uses technology, such as smartphones for mobile banking and cryptocurrency, to make financial services more accessible to the public.

The OCC decision should help fintech companies compete with established big banks that have made ongoing pushes to provide more digital services to customers.

Prior to the OCC decision, options for such fintech companies generally were limited to pursuing state banking charters, or seeking partnerships with federal or state financial institutions.

In the works for about two years, the OCC said its decision will help the banking industry evolve.

“The federal banking system must continue to evolve and embrace innovation to meet the changing customer needs and serve as a source of strength for the nation’s economy,” Comptroller of the Currency Joseph M. Otting said in a statement. “Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank.”

The OCC said its decision follows “extensive outreach with many stakeholders” over a two-year period.

The decision, the agency said, was consistent with bipartisan government efforts at the federal and state levels to promote “economic opportunity and support innovation” to improve financial services to consumers, businesses and communities.

In response to the decision, the U.S. Bureau of Consumer Financial Protection applauded the OCC’s action.

“We welcome the important steps taken by our fellow agencies to promote innovation,” Mick Mulvaney, the bureau’s acting director, said in a statement late Tuesday.

“Success will be determined by how well U.S. regulators coordinate their efforts,” Mulvaney said. “We look forward to working with our state and federal partners to ensure American global leadership in the fintech space for years to come.”

The OCC said fintech companies receiving national bank charters will be supervised like conventional national banks, and will be required to have capital, liquidity and financial inclusion commitments as appropriate.

Fintech national banks also will be expected to submit acceptable contingency plans to address significant financial stress that could threaten their viability. Such plans would outline strategies for restoring a bank’s financial strength and options for selling, merging, or liquidating a bank if recovery strategies don’t work.

Also, the OCC said new fintech companies awarded national bank charters will be subject to heightened regulatory supervision initially, such as other de novo banks. The agency also has the authority to unwind a fintech company that becomes a national bank if it fails.

“Providing a path for fintech companies to become national banks can make the federal banking system stronger by promoting economic growth and opportunity, modernization and innovation, and competition,” Otting said. “It also provides consumers greater choice, can promote financial inclusion and creates a more level playing field for financial services competition.”

Scott Blake is a PBN staff writer. Email him at