Fintechs are seeking bank charters at unprecedented rates. There are a couple of factors driving this.
First, as these organizations mature and attempt to scale, relying on partner banks can inject as much risk as reward. Reliance on sponsor bank(s) means managing multiple regulatory compliance regimens, while accepting those institutions’ appetite for risk and capacity restraints. It also puts fintechs at the mercy of the sponsor bank. If the bank hits a regulatory snag, it becomes the fintech’s problem. The fintech also has no control of central part of its business; if the bank pulls out, business suffers.
Of course, opting for a bank charter puts the regulatory compliance burden directly on the fintech. In today’s deregulatory environment, that may seem like a good bargain, especially as the current administration recently signed an Executive Order designed to streamline regulatory requirements for fintech firms.
“[The Executive Order] directs the head of each federal financial regulator to review existing rules, guidance, supervisory practices, and application processes within 90 days of the date of the executive order (i.e. by August 17, 2026) to identify changes that could promote innovation and competition for fintech firms, with particular emphasis on smaller and emerging companies. The review is intended to identify regulations and policies that unnecessarily hinder partnerships between fintech firms and federally regulated financial institutions (e.g. insured depository institutions, credit unions, broker-dealers, investment advisers, and futures commission merchants), or that slow approval processes for bank charters, credit union charters, insurance, licenses, and other authorizations.”[1]
Some relaxed federal regulations will lessen the risks for fintechs seeking bank charters. However, as a testament to the volatility of the regulatory landscape, another executive order, signed the same day, increases the federal regulatory burden by clamping down on activity by non-work-authorized individuals.
State regulators keep it interesting
Fintechs must also consider more stringent state regulations. As the Feds loosen regulations, some states are taking a more active role in financial regulatory oversight. For instance, New York State passed the FAIR Act that adds unfair acts and practices and abuse of acts and practices as prohibited conduct under consumer protection law. California has established the Business and Consumer Services Agency, designed specifically in response to the rollback of federal protections. At least 16 states have clamped down on junk fees, just as the feds relaxed rules against them.
It may become significantly easier for fintechs to gain charters, but they are entering a regulatory storm that promises to remain disordered for the foreseeable future. Feds reduce regulations in one area and increase them in another; states pick up the slack in some areas from which the feds retreat. Rinse and repeat.
The good news
The good news is that fintechs are not saddled with legacy compliance systems and processes. This allows them to take advantage of regulatory change management innovations from automation to AI more easily. They can also develop workflows that take full advantage of them.
Growth, the need to scale, and the desire for self-determination are driving fintechs toward bank charters. Modern compliance tools provide the only means of maintaining that forward momentum when saddled with a bank’s regulatory burden. Compliance tools should automate real-time notification of regulatory updates, as well as identify your obligations—the specific actions you must take to remain compliant under any rule. Also demand workflow tools that optimize efficiency and ensure the right people receive the wealth of valuable information AI automation provides.
Bank charters won’t be the right solution for every fintech, but those that choose them must prepare to meet sometimes-onerous regulatory challenges. Luckily, they have access to alternatives to the manual, inefficient processes that too often stymie the larger bank partners from which they seek independence.
[1] Juan Azel, Carl Fornaris, Gabriela Perez, “Trump White House executive orders create opportunities for fintechs and possible new compliance burdens for traditional financial institutions,” June 10, 2026
