Cutting Out the Middleman: Why Fintechs, Crypto Firms, and Payments Companies Are Seeking Their Own Bank Charters - Part 1

**Alan Kaplinsky** (0:07)
Welcome to today's episode of our webinar series, Cutting Out the Middleman, The Surge in FinTech Applications to Charter Banks, Industrial Banks, and National Trust Companies. I'm Alan Kaplinsky, Senior Counsel, and the founder and former chair of the Consumer Financial Services Group for 25 years at Ballard Spahr.
This is a repurposing of the webinar that we recently conducted. In this part two series, we explore the fundamental shifts we're seeing in the FinTech payments, lending, and crypto sectors, especially as these companies increasingly seek bank charters to internalize the benefits that come with being a regulated financial institution, rather than relying on traditional partnerships with banks. In part one, which covers the material from the first half of our live webinar program, we'll kick off with a market overview discussing the strategic drivers behind the surge in charter applications and we'll follow that by a comparative look at charter options and the infrastructure drivers that are shaping this landscape.
We will also begin our study of the use cases.
In part one, we'll talk about crypto native firms and why they are interested in getting charters and in particular, national trust charters from the OCC.
And in part two, next week, we'll be looking at other use cases involving lenders, in particular, buy now, pay later, and earn wage access companies, and the use case for non-banks that are involved in the payments business. Some of the key points we'll address in this first episode include the primary factors driving FinTechs and non-banks to seek their own charters, the importance of regulatory considerations, and which regulators oversee different charter types. We'll talk about the critical role of business plans and capital requirements and charter applications, and we'll provide some insights on how access to the Federal Reserve payment system and stable coin regulations are influencing strategic decisions. I hope you enjoy this in-depth discussion. Now, let's jump into part one of Cutting Out the Middleman.
Over the past several years, especially more recently during the Trump 2.0, we've seen a significant shift in how FinTech companies, payments firms, lenders, crypto-native businesses approach regulation growth. Increasingly, these firms are not just partnering with banks. They're seeking to become banks or bank-like institutions. Or as I put it in the title of our program, they want to cut out the middleman. And importantly, this trend is unfolding during what may be one of the most favorable political and regulatory environments in recent memory for charter applications. And indeed, in my entire period of practicing banking and consumer finance law, I don't think the political environment has ever been as favorable right now for what we're discussing today. The Trump administration and the federal banking agencies have at least so far taken a very supportive posture toward innovation and toward new entrants into the banking system. That doesn't mean, however, that the process is easy.
It is not an easy process. It takes time and it takes a lot of care and there's a requirement to work with people who've got a lot of experience and expertise. What I am saying, however, is that the door may be more open right now than it's been in any time in the past. What's striking is that in just the past year, regulators have conditionally approved a broad section of applicants from crypto native firms like Circle, Internet Group, and Ripple Labs to infrastructure providers like BitGo and Paxos, to major platforms like Stripe, and even a full-service De Novo bank in Aribor. Underscoring that this is not a niche trend, but a fundamental shift in who is entering the banking system. Let me briefly walk you through how we'll cover this topic today. We'll begin with a market overview, examining the forces driving this surge in charter applications. We'll then move into a comparative discussion of charter options, followed by a look at infrastructure drivers, including payment system access and stable coins.
The core of today's program is going to focus on three use cases that are consumer finance oriented. First of all, crypto native firms. Second, lenders, including products like Buy Now, Pay Later, or earned wage access providers, who we typically don't consider to be lenders, at least those of us in the industry, although that is an issue that is in and of itself subject to debate. Then the third use case will be payments providers. We'll then turn to the practical pathway on how to obtain a charter. Finally, we'll discuss what happens after you become a bank. We will run through the chronology of events. Let me now introduce our panel. I first want to introduce our very special guest, Lee Reiners, who is a Lecturing Fellow at the Duke Financial Economics Center and a widely recognized thought leader on financial regulation. Not just on the topic of crypto that we'll be discussing today, but on really banking and financial regulation and AI. His broad research agenda focuses on how new financial technologies fit within existing financial regulatory frameworks. Previously, he worked at the Federal Reserve Bank of New York as an examiner of systemically important financial institutions. So Lee, a very warm welcome to you.