The Convergence: When FinTechs Become Banks

Introduction

The line between fintech companies and banks is dissolving. 2025 became the year of the bank charter: 20 filings for de novo charters, bank acquisitions, or conversions were submitted (an all-time high), and the OCC received 14 de novo charter applications, nearly matching the total from the prior four years combined. Fintechs are seeking bank charters to access insured deposits (lower cost of funds), originate loans directly (eliminating partner bank dependency), and gain independent regulatory standing. Simultaneously, traditional banks are acquiring fintech capabilities and building digital platforms. The result is convergence: fintechs are becoming banks, and banks are becoming technology companies.

For FIG bankers, convergence is one of the most active advisory themes: charter application strategy, bank acquisition M&A (fintechs buying small banks for their charters), regulatory compliance structuring, and the valuation transition from fintech metrics (EV/Revenue) to traditional bank metrics (P/TBV, P/E) as fintechs mature into regulated depository institutions.

Fintechs seeking to become banks have several pathways, each with different regulatory implications:

De novo national bank charter (OCC): applying to the OCC for a new national bank charter. This is the most comprehensive pathway, subjecting the fintech to full OCC supervision, CRA compliance, and (if the parent is a bank holding company) Federal Reserve oversight. SoFi initially filed for a de novo charter before pivoting to an acquisition.

Bank acquisition: purchasing an existing chartered bank to obtain its banking license. SoFi acquired Golden Pacific Bancorp. LendingClub acquired Radius Bancorp. SmartBiz Loans acquired CenTrust Bank (OCC conditionally approved March 2025). This pathway is faster than de novo chartering but requires finding a willing seller and navigating the change-of-control approval process.

Industrial Loan Company (ILC) charter: ILCs are state-chartered depository institutions (primarily in Utah, Nevada, and a few other states) that allow access to FDIC-insured deposits and direct lending authority without subjecting the parent company to Federal Reserve bank holding company supervision. This feature makes ILCs attractive to technology companies that want bank-grade funding economics without the full regulatory burden of a bank holding company structure.

State trust company or limited-purpose charter: a narrower charter that allows specific activities (custody, payments, trust services) without full banking authority. Several cryptocurrency companies have pursued this pathway for digital asset custody.

Industrial Loan Company (ILC)

A type of financial institution chartered under state law (primarily Utah and Nevada) that can accept FDIC-insured deposits and make loans, but whose parent company is not classified as a bank holding company under the Bank Holding Company Act. This regulatory distinction is significant: the parent of an ILC is not subject to Federal Reserve supervision, capital requirements, or activity restrictions that apply to bank holding companies. ILCs were originally created to serve industrial workers, but they have become the charter of choice for commercial and technology companies seeking banking capabilities: Goldman Sachs (Marcus), BMW, Toyota, and several fintech companies operate through ILC charters. For FIG analysts, ILCs matter because they represent a pathway for non-bank companies to access the core advantages of banking (insured deposits, direct lending, payment network membership) without the full regulatory framework that applies to traditional bank holding companies. The ILC exemption is politically contentious: consumer advocates and community banks argue it creates an uneven regulatory playing field, while ILC proponents argue it promotes innovation and competition.

SoFi: acquired Golden Pacific Bancorp in 2022 to operate SoFi Bank, N.A. under a national bank charter. SoFi now holds nearly $30 billion in deposits, funding its personal loan, student loan refinancing, and mortgage origination businesses at a lower cost of capital than its pre-charter model (which relied on warehouse facilities and securitization). SoFi's charter transformed its economics from originate-to-distribute to balance-sheet lending.

LendingClub: acquired Radius Bancorp in 2021, becoming the first US marketplace lender to operate as a bank. LendingClub now uses deposits to fund a portion of its loan originations while continuing to sell loans to institutional buyers.

Varo: became the first consumer fintech to receive a de novo national bank charter in July 2020. Varo operates as a digital-only bank with full banking authority.

Nubank: received conditional US bank charter approval from the OCC in January 2026, positioning the $90 billion Latin American neobank to launch deposit accounts, credit cards, lending, and digital asset custody for American consumers.

The 2025 charter surge was enabled by a shift in regulatory posture. New leadership at the OCC, FDIC, and Federal Reserve created greater receptivity to non-traditional charter applicants, particularly those with technology-driven business models. The OCC's revised merger rules are expected to better support fintech and crypto acquisitions of small OCC-chartered institutions. Federal banking agencies signaled openness to new banks with focused or digital-first business models.

This regulatory shift is driving fintechs to move core activities (payments, custody, lending, stablecoin issuance) inside the regulated banking perimeter rather than relying on third-party bank partnerships.

The convergence trend is global. In Europe, Revolut obtained its UK banking license in July 2024 after a three-year application process, while N26 has held a German banking license since 2016. The European regulatory framework offers different charter pathways: EU e-money licenses provide some banking-like capabilities (holding customer funds, payment services) without requiring a full banking charter, creating an intermediate step that does not exist in the US system. The parallel convergence across the US, Europe, and Latin America confirms that the fintech-to-bank evolution is a structural trend rather than a US-specific phenomenon.

The convergence of fintech and banking is the defining structural trend in FIG. The 20 charter filings in 2025 signal that the most ambitious fintechs are choosing to operate inside the regulated banking system rather than alongside it, transforming themselves from technology companies into technology-enabled banks. For FIG professionals, this convergence ensures that fintech expertise and traditional banking analysis are no longer separate skill sets but complementary dimensions of the same advisory practice.