The fintech industry has justifiably greeted the OCC’s announcement of a national fintech charter with optimism. But one area where we have seen significant confusion is the possibility of the fintech charter being granted without deposit insurance, and the implications thereof.
Background. On December 2, 2016, OCC Comptroller Thomas Curry announced that the OCC is planning to take applications from fintech companies wishing to obtain a special purpose national bank charter. These banks would be national banks with the same privileges and obligations as traditional full-service national banks, but with specialized business plans and that may or may not choose to have deposit taking authority.
In his remarks, Comptroller Curry expressed his excitement about the great potential to expand financial inclusion and reach unbanked and underserved populations. At the same time, clearly recognizing that there are some industry players that are worried about new sources of competition from fintech banks, or that these new banks might otherwise have unfair advantages, Curry took great pains to seek to alleviate those concerns in his remarks and in the OCC’s white paper on the proposal.
Curry acknowledged that it will be difficult for the agency to determine the requirements to charter a fintech bank because of the “diversity of approach” among fintech companies. He noted that, for example, a payments model would be different than a marketplace lending one. However, he said that the OCC is a “firm believer in tailored innovation” and has the existing framework to evaluate these issues in the chartering process. Consistent with existing OCC regulation, the white paper states that a special purpose bank that conducts activities other than fiduciary activities must conduct at least one of the following three core banking functions: receiving deposits, paying checks, or lending money.