Approval by regulators at the Office of the Comptroller of the Currency has opened an avenue for start-ups to compete with banks on a more level playing field, as they vie for a slice of the nearly $16tn in deposits & $100tn in annual payments in the US banking system.
Last month, Varo Money achieved something it had worked three years to accomplish: it started accepting federally insured customer deposits. It was a watershed moment for the industry — coming only weeks after Varo had become the first consumer fintech company to be granted a national banking charter. But the milestone also raised questions in the industry about why it had taken so long for the US to bring fintechs into its regulatory regime, when other countries, from the UK to China, have been faster and more flexible. The answer, banking experts say, involves longstanding turf wars between regulators as well as fears that tech heavyweights such as Amazon and Facebook might move into financial services. Fintech executives point to another issue: hard lobbying by established banks that have long enjoyed the exclusive right to hold deposits insured by the Federal Deposit Insurance Corporation and lend money nationally.