QED Investors, a VC firm focused on investing in high-potential financial services firms in the US, has looked into why 2025 appears to have been the year of the bank charter. Since January of this year, there have been 20 filings for de novo charters, bank acquisitions or conversions have been submitted by these industry participants, representing an all-time high.
QED Investors questions why fintechs — known for their more agile, nimble, innovative go-to-market approach — would be willingly subject themselves to the greater regulatory oversight that comes with a bank charter.
The reasons, according to QED Investors, are threefold:
- Leading fintechs are reaching new levels of scale and maturity, allowing them to reap greater strategic and financial benefits from a charter to offset the accompanying investments.
- New leaders at supervisory agencies in the current administration have shifted regulatory priorities, leading to greater receptivity to bank charters from non-traditional applicants. This creates a timebound window to act with urgency.
- Some fintechs harbor continued concerns over the long-term risks that come with relying on a sponsor bank to access banking and payments rails, and the corresponding lack of control over their own destiny.
A QED Investors report, entitled, Seizing the Bank Charter Moment, co-authored with Oliver Wyman, tries to shed some light and provide perspective on this interesting paradox.
This report examines the maturation of scaled fintechs, increasing their suitability for a bank operating model. It offers an assessment of which types of fintechs should “pursue charters and an exploration of the economic trade-offs that come with bank status.”
According to the update, there is an emerging window for charter approvals due to “shifting political and regulatory winds.” The update also examines how the current wave of charters could potentially alter the future competitive landscape.
The report concluded:
“While a bank charter can unlock substantial strategic and financial value, it is not a one-size-fits-all solution. For many fintechs, the best strategy will be to continue with the bank sponsorship model. Given the potentially time-limited window to apply in a favorable regulatory environment and the time and cost required to pursue a charter, every fintech should be conducting an in-depth evaluation of its options.”
