- The OCC has been mulling a special-purpose banking charter aimed at fintechs that process payments.
- Currently, non-chartered fintechs are regulated and licensed state-by-state to process payments.
- Both state regulators and bank trade associations have opposed the idea of a special-purpose charter, saying that new risks could be introduced by offering charters to fintechs and big tech.
- The OCC argues that there are no new risks being introduced, but the oversight would be migrated from the state to the federal level.
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Over the past decade, fintechs have become more than a niche group of disruptive startups out of Silicon Valley. Today, fintechs like Stripe and Square have achieved massive scale — and valuations — and are an essential part of the financial-services industry.
But most fintechs aren’t licensed banks, meaning they don’t have a banking charter issued by the Office of the Comptroller of the Currency (OCC), one of the key regulators overseeing consumer banking. Instead, they are regulated and licensed at the state level, which means to operate nationally they have to work with 50 different regulatory bodies.
That could soon change, however, as the OCC is mulling a charter aimed specifically at fintechs that process payments, allowing them to be regulated at a national level.
As a result, payments fintechs would be able to sidestep state-by-state regulation. The charter would be a national version of a state money transmission license, which fintechs currently have to apply for in each state they operate in.
Through this charter, the OCC would get insight into billions of dollars worth of payments handled by fintechs that currently occur outside its jurisdiction. Similar to the way the regulator now monitors banks, the OCC would review fintechs’ control frameworks and risk management.
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