What the OCC Charter Would Mean for Fintechs

By
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May 1, 2017

There has been a lot of interest by fintech companies, investors, and traditional finance companies in the Office of the Comptroller of the Currency's (OCC) special purpose charter for fintech companies to become specialized national banks.

And while I think we're years, not months, away from the charter becoming a reality (if it does become a reality), here at CommonBond we're excited about what it could mean for the industry and for the consumer.

There are three reasons we think the OCC fintech charter could be a boon for fintechs, and therefore, the end customer.

1. Lower Capital Costs

This one is pretty straightforward: Being a chartered institution could provide Fintech companies more access to better pricing in the capital markets. That savings in cost means even more savings passed to the consumer.

2. Streamlined Regulatory Compliance

The charter would mean Fintech companies would need to meet regulatory standards in one jurisdiction (the federal government), instead of 51 (the 50 states plus D.C.). Such streamlining (which banks today benefit from) would lead to cost savings as well, which, again, allows Fintechs to serve their customers more efficiently.

3. Leveling the Playing Field

The OCC charter holds the promise of leveling the playing field with the game's traditional players (mostly, big banks). The more competition we can create in market, the better off the consumer. The more a company has to differentiate itself to stand out, the better.

At CommonBond, we've done that with consistently competitive rates, intuitive user interface, exceptional customer service and our one-for-one social promise (an industry first!). Customers shopping around that care about these aspects of the student loan experience often become our members.

Unanswered Questions Remain

How and when the OCC would execute on the charter remains to be seen and currently induces more questions than answers.

Would the hurdles be lower than they are for big banks? What are the capital ratios and liquidity requirements going to be? What types of controls and compliance responsibilities will there be beyond what we already have? What is all that going to cost?

If the OCC defines those metrics beyond the reach of fintechs, then the promise of the charter might never materialize. If, however, the metrics are conducive to responsible fintechs and commensurate with the risk of a company's model, then charter adoption is potentially strong, and that's a win for consumers.

There has been a lot of interest by fintech companies, investors and traditional finance companies in the Office of the Comptroller of the Currency's (OCC) special purpose charter for fintech companies to become specialized national banks.

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