United States: National Bank Charters For Fintech Companies

"Technology-based products and services are the future of banking and the economy."

"What excites me most about the changes occurring in financial services is the great potential to expand financial inclusion, reach unbanked and underserved populations, make products and services safer and more efficient, and accelerate their delivery. To live up to that potential, innovators must demonstrate real responsibility – whether innovating within or outside the federal banking system."

With these remarks, Comptroller of the Currency Thomas J. Curry announced on December 2 that the Office of the Comptroller of the Currency ("OCC") would move forward with considering applications from fintech companies that conduct at least one of three core banking activities (i.e., receiving deposits, paying checks or lending money) to become special purpose national banks. Announcement. The Comptroller explained that such fintech companies will have the option to seek a charter but will not be required to do so. The OCC will evaluate applicants to ensure they have a reasonable chance of success, appropriate risk management, effective consumer protection and strong capital and liquidity. 

The OCC simultaneously published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters. The White Paper.

The Comptroller articulated several policy reasons for this long-awaited decision.

Public Interest. Fintech companies hold the potential to "expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters [and] potentially deliver these products in a safer and more efficient manner."

Economic Growth/ Future of Banking. "Providing a national charter to those responsible innovators who seek one and meet our high standards can help promote economic growth across the country and recognizes that technology-based products and services are the future of banking and the economy."

Regulatory Oversight. "[H]aving a clear process, criteria, and standards for fintechs to become national banks ensures regulators and companies vet risks and that the institutions that receive charters have a reasonable chance of success, appropriate risk management, effective consumer protection, and strong capital and liquidity."

Practical Considerations

Whatever may be the advantages to the availability of a fintech charter from the perspective of the OCC, as described above, fintech companies themselves will need to weigh the advantages and disadvantages of applying for a charter based upon, among other things, their individual business models, operations and competitive environments.

Questions for a fintech company to consider will include, but by no means be limited to, the following.

  • National Bank Status and Attributes. Is the business currently inhibited by the lack of status and attributes under federal law of a special purpose national bank? (See discussion below, for example, of state law interest rate preemption enjoyed by national banks.)
  • Cost Savings. What costs of doing business today would be eliminated or decreased by having a special purpose national bank charter?
  • Or . . . Regulatory Cost Burden. What are the direct and indirect costs of having a special purpose national bank charter? Will such costs make particular businesses noncompetitive?
  • Comparison to Existing Regulation. How burdensome are state regulations today? How do those burdens compare to the considerable regulatory burdens that would come with a special purpose national bank charter?
  • Cost of Capital, etc. Will capital or other requirements to be imposed by the OCC be burdensome? Will such capital be available?
  • Modified Capital and Other Requirements. How will the OCC take into account the particularities of each of the fintech businesses and individual companies in setting capital and other requirements? In most cases, these will not be deposit-taking entities.
  • Competitors. How will the business be affected if competitors get a special purpose national bank charter?
  • Operating Considerations.  Will certain fintech companies have greater flexibility operating under a special purpose national bank charter? Will others have less flexibility?
  • Possible Failures? Will we see failures by fintech companies who are not able to obtain charters?
  • Consolidations/Acquisitions. Will we see consolidations of smaller companies and/or acquisitions by the larger companies?
  • Bank Secrecy Act/AML. What are the Bank Secrecy Act and anti-money laundering implications of becoming a bank?
  • State Laws and Regulations. What role will be left for state regulation of fintech companies that obtain special purpose national bank charters?

In a recent statement, New York State Department of Financial Services Superintendent Maria Vullo expressed opposition to any diminution of the role of the states in oversight of fintech firms—a position we expect other states will follow:

"Particularly now, with so much uncertainty at the federal level, New York will not allow consumer protections to fall into the void. The New York State Department of Financial Services (DFS) opposes any effort to federalize what states have been doing - and doing well - for over a century. Any reliance on a federal fintech regulatory framework, such as the proposal contemplated by the OCC, would be irresponsible if it were to ignore the states' historical role and longstanding expertise in this arena. State regulators, like DFS, are best positioned to continue to protect consumers and ensure that dynamic service providers like fintech firms will continue to flourish within an appropriately tailored regulatory regime. History has demonstrated that states, not the federal government, have the requisite knowledge and experience to effectively regulate nondepository financial service providers and guard against predatory and abusive practices." Report.

  • Trump Administration. Is the OCC fintech charter announcement, made a short time before the change in administration in Washington, consistent with the approach favored by the incoming administration? Will this action be embraced by the new administration?

Issues and Conditions

The OCC paper discusses the issues and conditions that the agency will consider in granting special purpose national bank charters, including the following.

Chartering Authority/the Business of Banking. The OCC authority to grant charters for national banks under the National Bank Act includes granting charters for special purpose national banks that conduct at least one of the following three core banking activities 1:

  • Receiving deposits
  • Paying checks
  • Lending money

Analysis of the business of each prospective applicant will be required to determine whether it conducts one of these three core banking activities.

Bank-Permissible Activities

Once a fintech company is granted a special purpose national bank charter, it may engage in only a limited set of activities permissible for national banks, which have been interpreted and developed over time. The OCC explains in its paper that it "has the legal authority to construe these activities to include bank-permissible, technology-based innovations in financial services" and that it may interpret the National Bank Act broadly to encompass new activities:

"Consistent with legal precedent, the OCC views the National Bank Act as sufficiently adaptable to permit national banks—full-service or special purpose—to engage in new activities as part of the business of banking or to engage in traditional activities in new ways. For example, discounting notes, purchasing bank-permissible debt securities, engaging in lease-financing transactions, and making loans are forms of lending money. Similarly, issuing debit cards or engaging in other means of facilitating payments electronically are the modern equivalent of paying checks. The OCC would consider on a case-by-case basis the permissibility of a new activity that a company seeking a special purpose charter wishes to conduct."

Structure/Rules and Standards. In addition to determining that an applicant's activities are activities within the business of banking, as discussed above, there are numerous requirements for obtaining a national bank charter, including relating to corporate and governance structures, capital, liquidity, compliance risk management, financial inclusion, recovery and exit strategies/resolution plan and authority, and comprehensive business plans covering all of the foregoing. The OCC paper acknowledges that "the agency may need to account for differences in business models and the applicability of certain laws" and that "the OCC may ... work with a fintech company to achieve the goals of a particular statute or regulation" by "taking into account any relevant differences between a full-service bank and special purpose bank." This could signal agency flexibility concerning standards for governance structure as well as capital and liquidity requirements.

A special purpose national bank would be subject to the laws, regulations, examinations, reporting requirements, and other supervision to which other national banks are subject. Some of these laws relate to the Bank Secrecy Act and anti-money laundering laws (discussed below), and prohibitions on unfair or deceptive acts or practices.

Even though the provisions of certain laws that apply only to insured depository institutions, such as the Federal Deposit Insurance Act and the Community Reinvestment Act, would not apply to a national bank that does not accept deposits, the OCC could impose requirements similar to those provisions on a special purpose national bank as a condition of granting a charter even if such special purpose national bank does not accept deposits.

Federal Preemption/Applicable State Laws. A special purpose national bank would enjoy the same status and attributes under federal law as does a full-service national bank. This would include preemption of state law to the extent it is preempted by the National Bank Act as amended by the Dodd-Frank Act. For example, a fintech company with a special purpose bank charter would be able to lend to borrowers nationwide at the interest rate permitted by the company's home state, and also would be entitled to transmit money without being subject to state money transmitter license obligations. Note that such a company could still be subject to state laws that would generally apply to national banks, such as state laws on  anti-discrimination, fair lending and debt collection.

Coordination Among Regulators

In addition to the OCC as the primary prudential regulator and supervisor for national banks, the following regulators may have oversight roles depending on the structure of the special purpose national bank and the activities it conducts:

Federal Reserve: With rare exceptions, all national banks are required to be members of the Federal Reserve System by subscribing for the stock of the appropriate Federal Reserve Bank. The statutes and regulations that apply to member banks would also apply to most special purpose national banks, which are administered by the Board of Governors of the Federal Reserve System and the Federal Reserve Banks. The Bank Holding Company Act of 1954 could apply if a fintech company operates as a special purpose national bank through a holding company that is the sole or controlling owner of such bank. The term "bank" for these purposes includes national banks if they are FDIC-insured institutions or they both accept demand deposits and make commercial loans.

Federal Deposit Insurance Corporation: A special purpose national bank that accepts deposits (other than trust funds) would be required to apply to and obtain approval from the FDIC.

Consumer Financial Protection Bureau: The Consumer Financial Protection Bureau ("CFPB")  may have supervisory authority over certain special purpose national banks for compliance with federal consumer financial laws, including over an uninsured special purpose national bank engaged in certain activities, such as offering or providing origination, brokerage or servicing of consumer mortgage loans, payday loans or private education loans, etc.

Bank Secrecy Act/Anti-Money Laundering

Regulation as a bank would have significant Bank Secrecy Act ("BSA") and other anti-money laundering ("AML") implications. Many regulated players operating in the fintech space currently do so as money services businesses ("MSBs"). By obtaining a special purpose charter, however, a fintech company that was previously considered an MSB would now be deemed to be a "bank" for BSA purposes. 

There are some significant benefits to a "bank" designation from an AML perspective. MSBs must, except in very limited circumstances, not only register as such with the Financial Crimes Enforcement Network ("FinCEN"), but must also embark on the often costly and time-consuming process of obtaining a money transmission license in each and every state in which they operate. If a fintech company is no longer considered an MSB, however, it would be exempt from the federal, and likely most state, registration and licensing requirements.2

In addition, while both MSBs and banks must develop an AML program in accordance with the BSA, FinCEN and state regulators subject MSBs to different, and in some ways enhanced, AML requirements compared to banks. For example, federal regulations require banks to file suspicious activity reports ("SARs") for certain transactions that aggregate to $5,000, whereas MSBs must file SARs for certain transactions that aggregate only to $2,000.

Overall, however, banks face more burdensome regulatory requirements and enforcement on both the federal and state level than MSBs. The BSA requirements for a bank are generally significantly more involved than those of MSBs. A fintech company operating as a bank would have to incorporate a customer identification program into its overall AML program and be required to conduct far more robust diligence on all accounts opened with the company. Just this year, FinCEN issued a final rule on customer due diligence requirements aimed at clarifying and strengthening such requirements for banks and certain other financial institutions, but not for MSBs. Additionally, banks are generally afforded increased regulatory scrutiny with regard to compliance with AML requirements by federal regulators.  Fintech companies that are not currently MSBs would, if they choose to obtain a bank charter, be subject to extensive AML obligations, including those described above. For those companies exposed to detailed AML requirements for the first time, compliance likely would be a significant undertaking.

Request for Comment. While the OCC has made it clear that it "will move forward with chartering financial technology companies that offer bank products and services and meet our high standards and chartering requirements," it is also seeking feedback on all aspects of its paper and responses to the following specific questions.

1. Public Policy Benefits/Risks

What are the public policy benefits of approving fintech companies to operate under a national bank charter? What are the risks?

2. Applicable Capital and Liquidity Requirements

What elements should the OCC consider in establishing the capital and liquidity requirements for an uninsured special purpose national bank that limits the type of assets it holds?

3. Financial Inclusion Commitment

What information should a special purpose national bank provide to the OCC to demonstrate its commitment to financial inclusion to individuals, businesses, and communities? For instance, what new or alternative means (e.g., products, services) might a special purpose national bank establish in furtherance of its support for financial inclusion? How could an uninsured special purpose bank that uses innovative methods to develop or deliver financial products or services in a virtual or physical community demonstrate its commitment to financial inclusion?

4. Financial Inclusion Requirement – Non-Lenders

Should the OCC seek a financial inclusion commitment from an uninsured special purpose national bank that would not engage in lending, and if so, how could such a bank demonstrate a commitment to financial inclusion?

5. Financial Inclusion Requirement – No Banking Services

How could a special purpose national bank that is not engaged in providing banking services to the public support financial inclusion?

6. Protections for Individuals/Small Business Borrowers

Should the OCC use its chartering authority as an opportunity to address the gaps in protections for afforded individuals versus small business borrowers, and if so, how?

7. Business Model vs. Regulatory Expectations

What are potential challenges in executing or adapting a fintech business model to meet regulatory expectations, and what specific conditions governing the activities of special purpose national banks should the OCC consider?

8. Safety and Soundness/Public Interest

What actions should the OCC take to ensure special purpose national banks operate in a safe and sound manner and in the public interest?

9. Fintech Chartered Banks and Fintech Companies Without Charters vs. Full-Service Banks

Would a fintech special purpose national bank have any competitive advantages over full-service banks the OCC should address? Are there risks to full-service banks from fintech companies that do not have bank charters?

10.  Different Approaches for Particular Products or Services

Are there particular products or services offered by fintech companies, such as digital currencies, that may require different approaches to supervision to mitigate risk for both the institution and the broader financial system?

11.  Regulatory Coordination

How can the OCC enhance its coordination and communication with other regulators that have jurisdiction over a proposed special purpose national bank, its parent company, or its activities?

12.  Concentration Risk

Certain risks may be increased in a special purpose national bank because of its concentration in a limited number of business activities. How can the OCC ensure that a special purpose national bank sufficiently mitigates these risks?

13.  OCC Assistance to Applicants

What additional information, materials, and technical assistance from the OCC would a prospective fintech applicant find useful in the application process?

Written comments to the OCC must be sent by January 15, 2017, via email to the following address:  specialpurposecharter@occ.treas.gov


1 A special purpose national bank may also engage in fiduciary activities.

2 New York's regulation requiring a license to engage in virtual currency business activity (commonly referred to as a "bit-license"), however, only exempts banks chartered by the State of New York. Therefore, the OCC charter will likely not release virtual currency businesses in New York from obtaining a bit-license.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.