A decade ago, the idea of a fintech holding a national bank charter seemed more theoretical than practical. Early applicants like Varo and SoFi were viewed as experiments, serving as proofs of concept that technology-driven firms could meet the same capital, compliance, and consumer protection standards as traditional banks. Then came a period of uncertainty. The Office of the Comptroller of the Currency’s proposed “fintech charter” stalled, legal challenges followed, and the FDIC showed little interest in insuring new entrants.
Over time, most fintechs turned to bank partnerships. The banking-as-a-service model fueled a wave of innovation, powering everything from digital lending to embedded payments. But as fintechs grew larger and more systemically important, regulators became more cautious about the model’s risks. By 2023, several partner banks had faced enforcement actions, and fintechs began asking a new question: not how to avoid being a bank, but when to become one.
That inflection point arrived this spring when the OCC conditionally approved SmartBiz Bank, a small-business lending platform that had long relied on partner banks to originate loans. The OCC’s decision authorized SmartBiz to acquire CenTrust Bank, N.A., rebrand it, and expand nationwide lending using deposits to fund its own balance sheet. It was a tangible signal that fintechs with established operations and strong compliance programs could now pursue full-service charters. More recently, the OCC granted conditional approval for Erebor Bank, the first de novo national bank under the agency’s updated framework. Erebor plans to offer digital-first payments and custody infrastructure, positioning itself as one of the most regulated entities in the stablecoin ecosystem and a test case for how fintech-led models can operate under full federal supervision.
Regulators Are Reopening the Door
The OCC’s recent actions represent a clear change in tone. After years of hesitation, the agency is again approving nontraditional charters for firms that can meet bank-level standards for risk management and compliance. Comptroller Jonathan Gould has outlined a vision for a more dynamic and inclusive federal banking system, describing chartering as a strategic lever to keep the system “diverse in nature and dynamic in scope of activities.” He has elevated the OCC’s licensing and chartering function to senior levels within the agency and signaled that de novo charters will no longer face a de facto “no” policy.
Regulatory openness tends to move in cycles. The initial wave of fintech charter interest in the late 2010s gave way to several quiet years, but the pendulum is swinging back. More than two dozen new bank charter applications have been filed this year, the majority by nontraditional or technology-oriented firms. Regulators appear more willing to test new structures, focusing on applicants that can demonstrate operational maturity, sustainable funding sources, and credible compliance programs rather than pure innovation.
That shift is already visible in the range of applicants moving forward. SmartBiz’s conversion and Erebor’s rapid approval, completed in roughly four months and taking only a fraction of the time required for Varo, are tangible examples of how the OCC is licensing technology-forward institutions that meet safety and soundness expectations. Other fintechs are following their lead. Revolut and Circle are pursuing federal trust charters, while states like Georgia and Connecticut have introduced frameworks designed to attract new entrants. Regulators appear intent on bringing fintech activity under direct supervision rather than relying solely on sponsor banks as intermediaries.
Timing is critical. Charters approved in the current environment are likely to remain valid even if political priorities shift. The result is a narrow but durable window for fintechs to secure long-term regulatory footing before the next cycle turns.
The Pivot Toward Direct Regulation
The rise of BaaS once looked like an elegant solution. Banks provided the charter and compliance oversight; fintechs brought technology and customers. The arrangement drove much of the industry’s growth but also created dependence. When a sponsor bank faced scrutiny, fintech partners often saw operations suspended or accounts frozen.
That experience has encouraged the largest and best-capitalized fintechs to seek more control. For many companies, applying for a charter is less about changing identity and more about completing a natural progression, thereby evolving from technology partner to fully integrated financial institution. Direct supervision provides operational stability, better funding access, and greater credibility with both regulators and customers.
The charter movement is also reshaping the talent market. Fintechs are hiring compliance officers, risk executives, and former regulators who understand how to operate under prudential oversight. For senior bank leaders, the appeal is equally strong: a regulated platform with startup agility, stock options, and potential IPO upside. Newly chartered fintechs may also become landing spots for agency officials, creating a transfer of experience that will further professionalize the sector.
A New Menu of Charter Models
The meaning of “bank” has expanded. What was once a single model, an insured national bank, has become a spectrum of regulated options suited to different business lines.
Fintechs now have several viable paths into the system, each with distinct tradeoffs:
- Full-service national banks like SmartBiz gain preemption and deposit-taking powers but must meet capital and community reinvestment requirements.
- National trust banks such as Anchorage and Circle provide custody and stablecoin services without federal deposit insurance.
- Industrial loan companies (ILCs) allow commercial parents to offer credit and payments while remaining outside direct Federal Reserve oversight.
- Uninsured state banks in states like Connecticut and Vermont offer supervision without full deposit-taking authority.
- Georgia’s merchant acquirer limited-purpose bank (MALPB) charter provides a streamlined option for payments firms needing access to Fed rails.
This shift reflects diversification in how regulators oversee different types of financial institutions. Fintechs are choosing the charter that best fits their business model, and regulators are signaling comfort with that variety as long as transparency and capitalization remain strong.
Charters have also become tools of business design. A company focused on lending may need a full national charter. A firm offering custody or tokenization services may prefer a trust charter. Others may begin with a state license and later transition to federal oversight. Innovation is being brought into the supervisory framework rather than left to operate outside it.it.
Why It Matters For Fintechs
Owning a charter gives fintechs permanence. It establishes a direct relationship with regulators and reduces reliance on third-party banks. It also strengthens consumer trust at a time when governance and transparency are essential competitive advantages.
For banks, the implications are equally significant. The next generation of competitors will not be unregulated startups but fully licensed institutions built on modern technology. This shift blurs the line between incumbents and innovators and will reshape competition across the financial sector.
Regulators benefit as well. Direct supervision of fintechs simplifies oversight and reduces the risk created by complex webs of partnership arrangements. It brings innovation under existing safeguards while maintaining accountability.
The charter wave marks a moment of maturity for the fintech industry. Companies that once measured success by speed and scale now view credibility and compliance as part of the growth equation. Regulation has become a foundation for expansion rather than a constraint on it.
The opportunity will not last forever. Regulatory windows open and close, and this one will too. Fintechs that move now will help define the next phase of modern finance.