- Key insight: Flex Rent is applying for an ILC charter and FDIC insurance to directly issue its core credit products to consumers.
- What's at stake: Fintechs applying for various bank charters could reduce the number of sponsor partnerships with community banks.
- Expert quote: "The new charters are losses for the banks that have enjoyed profitable partnerships with these fintechs, but they ultimately represent a small fraction of the bank-fintech partnership landscape." —FS Vector's Jasper Sneff Nanni
Flex Rent, a firm that finances rent payments, is the next fintech to join the queue for a bank charter, potentially reducing the addressable market for
Flexible Finance, the parent company behind Flex Rent, announced on Friday that it has submitted applications to the Utah Department of Financial Institutions and to the Federal Deposit Insurance Corporation to establish a bank subsidiary called Flex Bank.
The proposed bank subsidiary, supported with an ILC charter from the state of Utah, would make Flex an FDIC-insured institution. Flex is the latest of dozens of fintechs to
"Since the beginning of the current charter wave, the expectation that many large, established fintech lenders would become banks or ILCs has been baked in," FS Vector managing principal Jasper Sneff Nanni told American Banker. "The new charters are losses for the banks that have enjoyed profitable partnerships with these fintechs, but they ultimately represent a small fraction of the bank-fintech partnership landscape."
The proposed bank would issue Flex's core credit products directly, including Flex Rent, and provide users with access to FDIC-insured deposit accounts. Currently, the fintech works with
Annie Delgado, a fintech and banking consultant with prior experience at Goldman Sachs and Silicon Valley Bank, told American Banker that the bank and fintech partnership space is reshaping but not necessarily weakening as fintechs ask regulators for bank charters.
"Many of these relationships are entering an operational phase where even a chartered fintech operates in an ecosystem where banks are playing distinct, critical roles," she said. "The partnership map isn't going away, and I see it being redrawn around specific functions and needs. There's a healthy ecosystem of companies on the perimeter of the charter activity that will still need a strong bank partner as they expand their product set and business."
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According to Sneff Nanni, Flex would be taking on a complex set of operational requirements and obligations that are currently handled by its partners should its charter application be approved.
"Done right, partner banking is and will remain a great business," he said. "Most fintechs will never be banks and will always rely on the services that a partner bank offers. Even those companies that have made the jump, like
Flex has processed around $40 billion in rent for approximately 3.2 million renters since 2019, according to company-reported figures, which Flex claims has led to avoided rent late fees of $780 million.
"A bank charter allows us to build directly on a foundation of federal deposit insurance and full state and federal bank regulatory oversight, strengthening the products millions of renters already rely on," Flex co-founder and CEO Shragie Lichtenstein said in a statement. "Rent is the single biggest bill in most people's lives, and it's often the one least adapted to how they're actually paid. This charter gives us a permanent, regulated foundation to keep closing that gap."
The proposed bank would be headquartered in the Salt Lake City area, according to a company statement, and would operate nationally through digital channels. Jeff Berkson, Flex's chief banking officer, is proposed to serve as president and CEO of Flex Bank.
