Numerous fintechs are considering owning a bank or obtaining a banking license – either a national banking license, a state banking license or a specialty license. In this episode, we have our special guest Michele Alt, co-founder and partner of Klaros Group, an investment and advisory firm, and Scott Coleman, partner in our Consumer Financial Services Group who leads our banking practice. Both Michele and Scott help banks and fintechs navigate the complicated regulatory issues that are critical to their growth and sustainability.

We discuss the reasons why fintechs want to become banks and why regulators are hesitant to license them. Alt says a bank license provides a fintech with low-cost financing in the form of FDIC-insured deposits and eliminates the applicability of myriad state licensing requirements. On the downside, she says, there are burdensome capital requirements and regulators are often reluctant to embrace innovation. We discuss how some regulators fear fintechs are driven by growth instead of profits and how that could lead to lax management practices. Regulators have reason to be concerned about these risks, and when you license a bank, you are responsible for them.

Alan Kaplinsky, senior counsel in Ballard Spahr’s Consumer Financial Services Group, will lead the discussion.

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