Are you a fintech seeking a bank charter? Consider these implications

If you partner with fintechs to provide consumer financing, their quest for bank charters will change how you do business. Many fintech lenders are currently moving away from 'rent-a-charter' models to become full-fledged banks. This shift is driven by a more receptive regulatory environment, but it comes with strings attached. For the merchant or retailer, a partner with a bank charter usually means more stable funding and potentially lower costs over the long term. However, it also means your financing partner will face much stricter federal oversight. Expect your fintech partners to tighten their compliance requirements for you. As they become regulated banks, they must treat merchant relationships with higher scrutiny. Oversight on how you market loans, how you handle customer data, and how you disclose terms will increase. The days of 'move fast and break things' in lending are ending. This transition provides your business with more security, as your lender won't be as vulnerable to sudden 'valid-when-made' legal challenges. At the same time, prepare for more paperwork and more 'by-the-book' procedures during the onboarding and auditing phases of your financing program. While the regulatory burden increases, the result is a more durable and reputable financing product for your customers.

Source: American Banker — Top News

← Return to the library· Submit a correction