The Flood of Fintech Bank Acquisitions: Why Now, and Should You Follow Suit?

Whether you love it or hate it, you can’t deny that the pace of fintech change is accelerating since a certain politician returned to Washington in January 2025. The biggest change of all might be the surge of bank charter approvals and acquisitions.

Under the prior administration, the few fintechs that wanted to acquire a bank, or get a charter, faced a long and arduous journey. That’s changed in the Trump administration. Tim Scott, Chair of the Senate Banking Committee, announced in January 2025 that he wanted to create “clear rules of the road for new and innovative financial technologies and service providers.” Since then, 20+ fintechs have applied to acquire a bank, or receive a charter. See below for a (non-exhaustive) overview:

I’ll bet many fintech leaders are now wondering: Should we get in on this? What kind of charter should we apply for? Can a fintech without a bank charter compete?

Here’s a high-level overview. I find this topic fascinating, because different charters provide such different advantages and limitations. Hopefully you’ll also come to see it that way.

Why do fintechs suddenly want banks?

Fintechs want to own banks because of two recent trends: constrained partner banks and a much more cooperative government.

Partner banks aren’t supporting new use cases

Of course, a fintech needs a partner bank to bring its products to life. Unfortunately, many of the banks that support fintech were hit with consent orders — think probation — in 2023 and 2024.

Federal regulators alleged that these banks violated regulations regarding the Bank Secrecy Act/Anti-Money Laundering (BSA/AML), consumer protection, and/or third-party oversight. The banks were then compelled to operate under consent orders, which severely limit their ability to support new products and use cases. Fintech banks under consent orders include Evolve, Thread, Metropolitan Commercial Bank, CBW, Cross River Bank, and Sutton, among others.

If partner banks can’t support new use cases, fintechs need to find another way forward. Mercury CEO Immad Akhund laid out the problem in a recent press release while discussing the formation of Mercury Bank.

“Our customers have been asking for Zelle, for expanded lending, [and] for payment infrastructure we actually control,” Akhund said. “We couldn’t give them those things without a bank charter. Those gaps have always bothered me. This is how we start closing them.”

Even if only a few fintechs acquire banks, every fintech ultimately benefits. That’s because the fintechs that do acquire banks can build them as a one-stop-shop for other fintechs. This would solve a common industry problem — namely, fintechs often need to split their products across multiple banks.

It’s not hard to find examples of fintechs relying on multiple banks. Take Mercury — per its terms and conditions, it relies on no fewer than three banks — Choice Financial Group, Column N.A and Patriot Bank, offering different card and deposit products at each bank.

That’s surely cumbersome for Mercury and its customers to handle, as each user's finances are split across so many banks. Streamlining operations to a single bank (or maybe two for redundancy) would surely be easier for everyone involved — but because of all the consent orders, that’s not really possible.

The federal government’s goals and attitude have changed

For fintechs, the Trump administration is night and day compared to the Biden administration.

Fintechs need to innovate to remain competitive, grow, and meet evolving customer expectations. But banks under consent orders can’t play along unless they get explicit regulatory approval. That slows everything down substantially.

If current partner banks can’t support innovation, fintechs need to make their own partner banks.

This dovetails well with the Trump administration’s goals — namely, increased innovation in financial services. The Trump administration looks favorably on fintechs acquiring banks, provided those fintechs are responsible and innovative. And from there, we’ve seen a flood of acquisition plans.

This change in attitude is exemplified by Trump’s fintech-focused Executive Order that was issued in mid-May — compelling federal regulators to remove roadblocks to fintech innovation.

What charters exist, and why do fintechs want them?

There’s a few charter types that have proved most popular for fintechs. There’s generally a trade-off between capabilities and the challenge of applying. Less powerful or comprehensive charters require simpler, less rigorous applications, while more powerful charters demand substantial effort.

OCC Trust Charter

• Who is applying for this? Companies specializing in cryptocurrency, including Ripple, BitGo, Paxos, Circle, and Crypto.com.

• What does it allow?: This charter lets companies hold and service digital assets under a unified federal license.

• What’s the catch?: Acquiring this charter doesn’t guarantee a federal reserve master account, which means the fintech may need an intermediary to actually interface with the Federal Reserve. Their funding and lending capabilities are also limited. But for a company focused on stablecoins, for example, these downsides are mostly unimportant.

Industrial loan company

• Who is applying for this? Companies specializing in lending, including Block and PayPal.

• What does it allow?: ILCs are state charters — typically through Utah, though Nevada is growing in popularity. They gain access to Federal Reserve master accounts, offer FDIC-insured deposits (a critical enhancement by the current administration), and have a wide array of lending capabilities. Unlike other charter types, they are exempt from the Bank Holding Company Act, bypassing major logistical complexity

• What’s the catch?: State-chartered lenders may soon be subject to each state’s rate caps when working with out-of-state customers. This could be disastrous for national lenders, since interest rates could be severely constrained. National Association of Industrial Bankers v. Weiser initially ruled that the state of Colorado could cap interest rates from out-of-state banks, but that decision has since been vacated until a full trial takes place.

Georgia Merchant Acquirer Limited Purpose Bank (MALPB)

• Who is applying for this?: Acquiring processors like Stripe, Fiserv, and Checkout.

• What does it allow?: The so-called “skinny charter” lets processors connect directly to Visa and Mastercard, cutting out the third-party bank as an intermediary. The more limited nature of the charter means a more streamlined application process.

• What’s the catch?: “Skinny charters” don’t have master accounts, meaning money must still be stored at another bank. These charters also don’t support RTP, FedNow, or direct money movement through services like Visa Direct or Mastercard Send.

OCC National Bank Charter

• Who is applying for this?: Large issuers like Varo, Revolut, Nubank, Mercury, and Erebor.

• What does it allow?: Everything — including a master account and federal exemption that trumps state regulations like money transmission and usury caps. It’s the gold standard for charters.

• What’s the catch?: Obtaining a national bank charter is time-consuming and challenging. It necessitates the creation of a Bank Holding Company and demands immense regulatory scrutiny. Applicants also need to meet high capital requirements.

Why don’t fintechs want state-chartered banks?

For well over a decade, fintechs have been heavily reliant on state-chartered banks. Ironically, now that fintechs are acquiring banks of their own, they don’t want general-purpose state-chartered banks. In fact, they’re going out of their way not to acquire them — the Georgia MALPB, ILCs, and the like all represent specialized alternatives.

That’s because the state-chartered banks don’t have coast-to-coast, 50-state exemptions from state regulations. Lending is restricted by ongoing legislation like the NAIB v. Weiser case mentioned above, states like Iowa have long since opted out of certain clauses from 1980’s Depository Institutions Deregulation and Monetary Control Act (DIDMCA), and states like California force out-of-state banks to adhere to state money transmission rules if they’re not insured by the FDIC (which includes Georgia MALPBs).

All of this to say — acquiring a state-chartered bank isn’t worth it, unless you only want to operate in one state. You’d have to do extensive state-by-state due diligence to operate nationally — applying for state licenses, etc. And that’s not a burden most fintechs want to take on.

So what should fintechs apply for?

There is a clear “best answer” here — the OCC national bank charter. If you want to issue, acquire, lend, hold custodial funds, and/or issue stablecoins, you can do all of those. And you don’t have to worry about state-by-state license requirements.

Of course, the catch is that forming a Bank Holding Company is legally challenging, time-intensive, and requires a major corporate restructuring. It’s beyond what most companies have the capacity to do.

The alternatives I’ve described above don’t need a Bank Holding Company, but they each have some pretty significant downsides. An OCC Trust works fine for stablecoins or other cryptocurrency, as long as you can live without a full Fed master account. State-chartered ILCs can work for lending, but depending on how legislation and court cases evolve this year, they may soon be incapable of supporting a national lending scheme.

I’d strongly recommend against a Georgia MALPB “skinny charter.” No matter what your risk appetite is, the locus of control will largely rest with the bank that holds your money. You’ll likely find yourself butting heads with the bank when you try to add new use cases or mature current ones, which defeats the purpose of getting the charter in the first place.

It’s exciting to imagine what the fintech industry will look like in a year or two, as more companies build ecosystems around their charters. Over time, I expect those with better charters (particularly the OCC National bank charters) to thrive with a variety of use cases, while those saddled with more restrictive charters will likely fall behind.