Is a banking license synonymous with digital trust?
We see a trend for neobanks and fintechs to rely on a banking license to earn – or rather buy – that trust. here we look at the pursuit of a banking license by three different digital players.
Why get a license? Earlier this week, Delaware-based Bancorp Bank announced that it had obtained a national bank charter from the Office of the Comptroller of the Currency (OCC). The fintech company has been providing banking and lending services to non-banking entities for over 20 years.
In the Press release Commenting on the new license, CEO Damian Kozlowski expressed his satisfaction at having a new regulatory partner, the OCC, and emphasized safe and healthy banking innovation.
As fraud runs rampant, traditional and non-traditional asset markets behave erratically, and loose fintech regulations create risk for consumers, The Bancorp Bank said obtaining a banking license would reinforce its commitment to regulatory compliance and consumer protection.
Is a license worth it? In a interview with TechCrunch this week, Varos CEO Colin Walsh detailed all the work and costs involved in obtaining a banking license. Varo became the first nationally chartered digital bank in 2020, and Walsh said “100% worth it.”
- Walsh said a banking license allowed Varo to offer low-cost products and services to consumers. Varo says her main mission is to help those with less money gain opportunities in the financial world, such as construction and access to credit.
- The banking license also gave Varo greater control over its regulatory compliance. Because Varo does not need to partner with a bank to offer its services, it is not exposed to third party risk.
The main reasons why Varo got a banking license revolved around good customer service and good customer protection, which builds consumer confidence.