We see a trend of neobanks and fintechs leaning on a banking license to earn—or rather buy—that trust. Here we look at three different digital players’ pursuit of a banking license.
Why get a license? Earlier this week, Delaware-based The Bancorp Bank announced that it obtained a national bank charter from the Office of the Comptroller of the Currency (OCC). The fintech company has been providing banking and lending services to nonbank entities for more than 20 years.
In the press release about the new license, CEO Damian Kozlowski expressed satisfaction with having a new regulatory partner, the OCC, and emphasized safe and sound innovation of banking services.
With fraud running rampant, traditional and nontraditional asset markets behaving erratically, and loose fintech regulations creating risk for consumers, The Bancorp Bank felt obtaining a banking license would reinforce its dedication to regulatory compliance and consumer protection.
Is a license worth it? In an interview with TechCrunch this week, Varo’s CEO Colin Walsh detailed all of the work and costs that went along with getting a banking license. Varo became the first nationally chartered digital bank in 2020, and Walsh said it was “100% worth it.”
- Walsh said a banking license allowed Varo to offer lower-priced products and services to consumers. Varo says its main mission is helping those with less money gain opportunities in the financial world, like building and accessing credit.
- The banking license also gave Varo greater control over its regulatory compliance. Because Varo doesn’t need to partner with a bank to offer its services, it doesn’t open itself up to third-party risk.
Varo’s primary reasons for obtaining a banking license revolved around good customer service and customer protection—which builds trust with consumers.