The Office of the Comptroller of the Currency (OCC) will consider applications from fintech companies to become special purpose national banks, Comptroller Thomas Curry announced Friday.
Over the past year, no topic in banking and finance has drawn more interest than fintech, and for good reason, Curry noted in prepared remarks while speaking at the Georgetown University Law Center. The number of fintech companies in the United States and United Kingdom has grown to more than 4,000, he noted, and in the last five years investment in the sector has expanded from $1.8 billion to $24 billion worldwide.
Recognizing the need for a non-supervisory forum for banks and fintechs to interact with the OCC, Curry established an Office of Innovation in October.
“Our next step, which I am announcing here today, is that the OCC will move forward with chartering financial technology companies that offer bank products and services and meet our high standards and chartering requirements,” Curry said. “First and foremost, we believe doing so is in the public interest. It is clear that fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters.”
Fintech charter applications provide businesses a choice without creating a requirement to seek a charter, he added. Companies seeking a charter are evaluated to ensure they have strong capital and liquidity, effective consumer protection, appropriate risk management, and a reasonable chance of success.
Public Input Sought
The OCC published a paper on the conditions that the agency will consider in granting special purpose national bank charters. The paper is available on the agency’s website. Comments can be submitted through Jan. 15, 2017.
New technology makes financial products and services more accessible and more tailored to individual consumer needs, the OCC noted in its paper. At the same time, consumer preferences and demands are evolving, driven by the entry of 85 million millennials into the financial marketplace.
Responding to those market forces are thousands of technology-driven, nonbank companies that offer new products and services.
National Charters Offer Benefits
“The reality today is that the 4,000 fintech companies out there are already competing with national and state banks, without regard to any of the national bank responsibilities and under a patchwork of supervision,” Curry said. “Granting national charters to the companies who desire and warrant one doesn’t weaken the competitive position of existing banks or the dual banking system. In some ways, it levels the playing field because statutes that by their terms apply to national banks would apply to all special purpose national banks, even uninsured ones.”
Five years ago these services either were available only from traditional banks or not available at all, the paper noted. Initially, many of these nonbank providers of financial services viewed themselves as competitors of banks. Now fintech companies are considering whether to become banks.
Fundamental Policy Questions
Fundamental policy questions include: Is the nation better served when banking products are provided by institutions subject to ongoing supervision? Should a nonbank company offering banking-related products have a path to become a bank? What conditions should apply if a nonbank company becomes a national bank?
Applying a bank regulatory framework to fintech companies will help ensure such companies operate in a safe manner so they can serve the needs of customers as banks do that operate under full-service charters.
In addition, applying the OCC’s uniform supervision to fintech companies will promote consistency in the application of law and ensure consumers are treated fairly.
Providing a path for fintech companies to become national banks can make the federal banking system stronger.
The OCC’s oversight would also encourage the companies to explore ways to promote fair access and financial inclusion and innovate responsibly, the paper noted.
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