The Independent Community Bankers of America (ICBA), a lobbying group representing small banks, wants to put the Kibosh on SoFi offering banking services in the US. As was recently reported, SoFi has applied for a Charter as it seeks to broaden its services to a far wider audience. The move by SoFi was not unexpected as the Fintech firm had acquired Zenbanx, a digital only bank, early in 2017.
According to a report in PYMNTS, Chris Cole, senior regulatory counsel at the ICBA, says SoFi is attempting to take advantage of a loophole to provide banking services. The ICBA is expected to submit a comment letter to the FDIC to try and block SoFi from gaining bank status. And why would the ICBA want to stop SoFi from receiving a banking charter? They don’t want the competition, of course.
Banks have struggled with a regulatory environment that has ladled rule upon regulation onto banks for decades. Compliance costs are eating up a growing amount of revenue and productivity. SoFi is a highly regulated entity as well but the streamlined Fintech is light on expensive bricks and mortar and is thus well positioned to compete effectively against traditional banks.
Cole says, “We want these Fintech companies to be subject to the same kind of regulations as banks are.” Which is code for, we don’t want to compete with them at all or, at a minimum, if we slow down the process a bit, maybe we can buy some more time to change and adapt. Yep.
If the ICBA is effective who loses out? Well, the consumer of course. SoFi is well may be able to provide better services at a lower cost. The platform has already proven itself rather adept at refinancing student loans at a lower cost. In light of this fact, the FDIC will be hard pressed to protect one sector of finance (old banks) to the detriment of another (Fintech).