A quiet but profound transformation is reshaping the American financial sector, driven by an unprecedented surge in applications for new banking charters. In an astonishing display of renewed interest, the Office of the Comptroller of the Currency (OCC) processed as many applications in 2025 as it had in the four preceding years combined. This dramatic influx signals more than just a shift in market dynamics; it points to a fundamental change in the disposition of federal regulators, suggesting that the long-standing barriers to entry for new banking institutions are finally being dismantled. This development has unleashed years of pent-up demand, primarily from the technology sector, and is poised to introduce a new wave of competition into a traditionally insular industry. The central question now is not if the landscape will change, but how profoundly and how quickly these new entrants will alter the future of American banking.
A New Regulatory Climate
The primary catalyst for this application boom can be traced directly to a significant reversal in regulatory philosophy emanating from Washington. Under the 2025 Trump administration, key figures such as Comptroller of the Currency Jonathan Gould and Federal Deposit Insurance Corp. (FDIC) Chair Travis Hill have publicly articulated a more welcoming stance toward de novo charters. This approach marks a stark departure from the “zero-risk tolerance” posture of the previous Biden-era regulators, whose cautiousness was heavily influenced by the multibillion-dollar collapse of the crypto exchange FTX. The current leadership’s open encouragement has been interpreted by the market as a green light, effectively signaling that the doors to the federally regulated banking system are once again open for business. This change in tone has been described by industry veterans like David Sewell, a partner at Freshfields, as “the most consequential thing that has happened and probably will happen in my career,” underscoring the magnitude of the policy shift and its potential long-term impact on the financial industry.
The effect of this regulatory thaw has been an immediate and diverse flood of applications from a wide array of non-bank entities, with the financial technology (fintech) sector leading the charge. These firms are now seeking to formalize their market position through several distinct charter types. The most popular option in 2025 was the national trust charter, with 18 applications filed with the OCC, an attractive route as it allows an entity to custody assets under a federal framework without the more rigorous capital and compliance requirements associated with taking deposits. Meanwhile, six applicants received conditional approval for full-service de novo charters, representing a significant commitment to traditional banking. The surge also includes applications for the highly controversial Industrial Loan Company (ILC) charter from large corporations like Nissan and PayPal, and even state-level pursuits, such as the merchant acquirer limited-purpose bank charter sought by Checkout.com in Georgia. An example from 2026 includes the application from World Liberty Financial, the Trump family’s cryptocurrency platform, for a national trust charter, highlighting the diverse players entering the fray.
The Strategic Imperative for a Banking Charter
The motivations compelling fintechs and other non-bank entities to pursue a banking charter are multifaceted, revolving around the core business principles of control, cost, and compliance. Many of these firms currently operate through complex and often restrictive “banking-as-a-service” partnerships, where they rely on a sponsor bank to provide the regulated infrastructure for their products. By securing their own charter, these companies can achieve greater autonomy. As noted by Jasper Sneff-Nanni of FS Vector, a charter grants direct control over product development, marketing, and the end-to-end customer experience, liberating them from the constraints and dependencies of a partner institution. Furthermore, a bank charter unlocks access to a more stable and significantly lower-cost source of capital through FDIC-insured deposits. Anthony Noto, CEO of SoFi, one of the few fintechs that secured a charter during the more restrictive Biden administration, has highlighted how this direct access to cheaper funding allows the company to offer more competitive lending rates to its customers, creating a distinct market advantage.
Beyond operational control and cheaper funding, the strategic rationale for obtaining a charter extends to enhanced profitability and dramatically simplified regulatory burdens. By eliminating the intermediary sponsor bank, a chartered fintech can retain a much larger portion of the revenue generated from each transaction, which directly boosts its bottom line and improves financial performance. Perhaps even more importantly, a federal charter offers a streamlined compliance structure. Instead of navigating the bewildering and often contradictory patchwork of regulations across 50 different states, a federally chartered institution answers primarily to a single federal authority, such as the OCC. This consolidation significantly reduces compliance complexity, lowers associated legal and administrative costs, and allows the company to scale its operations nationwide with greater efficiency. This regulatory simplification is not just a matter of convenience; it represents a powerful strategic advantage that allows these newly minted banks to focus their resources on innovation and customer acquisition rather than on navigating a fragmented legal landscape.
A Competitive Shakeup and Its Controversies
The influx of these technologically advanced and agile new banks is widely seen as a significant competitive threat to the established banking sector. Experts like David Sewell view this trend as a “wake-up call” that directly challenges the long-held “franchise value” of a traditional banking license, which for decades has served as a formidable barrier to entry. However, the immediate impact is not expected to be a macro-level disruption. As Michele Alt of Klaros Group has pointed out, the number of new entrants remains “tiny” when compared to the approximately 4,000 incumbent banks operating across the United States. The more substantial long-term threat is not rooted in the quantity of new competitors but in the quality and innovation of their product offerings. The central question is whether these fintech-native banks have engineered a “better mousetrap”—that is, superior products and customer experiences that, when “turbocharged” by the benefits of a bank charter, could significantly erode the market share of traditional players. The true competitive impact, Alt suggests, will likely become much clearer over the next five years as these new entities mature, scale their operations, and begin to fully leverage their unique advantages.
This wave of new charters did not proceed without encountering significant opposition and controversy. Bank trade groups and several prominent lawmakers raised alarms about the potential risks these new entities could introduce to the financial system. The ILC charter became a particular point of contention, with critics, including Senators Elizabeth Warren and Andy Kim, arguing that it exploited a loophole in the Bank Holding Company Act. They contended that because ILCs were not required to offer demand deposit accounts, their parent companies could avoid being classified as “bank holding companies,” thereby evading the comprehensive and consolidated supervision of the Federal Reserve. This, they argued, created an unfair competitive landscape where large commercial firms could engage in banking without being subject to the same stringent oversight as traditional bank owners. Despite these strong objections, regulators appeared to move forward, with experts like Janet Gao of Georgetown University viewing the trend as a beneficial “middle ground.” It was argued that bringing innovative fintechs under the federal regulatory umbrella subjected them to higher standards, which ultimately enhanced their reliability and benefited the entire financial system.
