There are perspectives pouring in throughout the technology and regulation worlds after yesterday's Office of the Comptroller of the Currency (OCC) announcement that fintech firms may apply for special national charters. This move potentially allows "online lenders, payments firms and certain cryptocurrency ventures to operate without relying on a bank."
The major considerations for firms seeking to take on banking responsibilities include:
- Is our compliance program ready to operate without reliance agreements in place with banking partners?
- Is there enough talent in my organization to effectively mitigate compliance risk? If not, can we afford to bring them in?
- Does our technology expertise extend to regulatory requirements and risk mitigation capabilities?
- How will the vertical market advantages that our technology leverages be affected by horizontal growth in taking on additional regulatory responsibilities?
- What consumer protection issues pose risk to our organization post-chartering?
Our A&M team is happy to discuss these matters with the fintech community before making the leap into applying for a charter.
Unclear is how many fintech and cryptocurrency firms will actually apply. Many have already been talking with OCC officials about the possibility of charters. Yet Otting has repeatedly said most indicate the regulatory demands are daunting and that they’ll probably still partner with existing banks. "This is not for an immature fintech company,” Whalen said. “It’s for a fintech company that has raised a sizable amount of money.” The OCC said Tuesday that fintech applicants will initially face “heightened supervision” like any other new bank, and that oversight will be akin to that of “similarly situated national banks, to include capital, liquidity and financial inclusion commitments as appropriate.” Each application will be open for public comment, and the agency will try to make a decision within 120 days.
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