Three ways banks can defend themselves against the fintech charter boom

• Key insights: A surge in bank charter approvals for fintechs and crypto firms creates new risks for sponsor banks.
• What's at stake: Regional banks that built business models as fintech sponsors may face a loss to their revenue.
• Forward look: Traditional banks, especially regional and community institutions that have relied on fintech partnerships, should consider options to defend their deposits and revenue streams. 

Regional banks may need to reevaluate their fintech relationships as their key partners turn into fully chartered, direct competitors. 

The influx of new U.S. bank charter applications — the most since before the 2008 financial crisis — marks a significant structural shift in banking. 

That leaves regional banks uniquely exposed. Many regional and community institutions rely on sponsor bank economics, with sponsor banks attributing as much as 51% of their revenue and deposits to embedded finance partnerships, according to a 2024 report by identity risk management company Alloy.

This structural transition may reshape the mechanics of the U.S. payment system while introducing potentially new vectors for consumer vulnerability. In preparation of this, there are three immediate potential protection strategies for banks to take: 

• Launch localized and digital marketing campaigns emphasizing the security of FDIC insured deposits. Use clear, transparent messaging to educate your local market on the difference between a "payment/trust platform" and a federally protected commercial bank. 
• Accelerate your bank's integration of real-time payment rails like FedNow and RTP to compete with the instant settlement speeds of chartered crypto/fintech networks. 
• Conduct stress testing on your deposit base to identify what percentage of your total deposits are tied directly to fintech partners or sweep accounts. Pivot your fintech partnership division toward mid-market, niche, or early stage startups that cannot yet afford or qualify for a national OCC charter. 

Fintechs and sponsor banks

Historically, fintechs relied on these regulated sponsor banks to offer traditional financial products without holding a banking license themselves. Over time, however, these fintechs scaled their customer bases and transaction volumes alongside their bank partners. Now, supported by a more favorable regulatory environment for acquiring national trust charters, fintechs may no longer need sponsor banks. Having already established their market presence, they are transitioning from lucrative partners to direct competitors. 

Regional banks that built business models as fintech sponsors face a potential threat to their revenue as fintech and crypto firms secure their own charters, impacting these regional institutions' pools of deposits and transaction fees. Furthermore, because national trust charters allow fintechs to offer services that functionally mirror commercial checking accounts, often without standard FDIC deposit insurance, regional banks must also contend with a market where consumers may be misled by the "national bank" label, diluting the perceived value of traditional, federally insured institutions. 

In 2026, not only have the number of applications grown, but the time to approval has dropped. The OCC made a deliberate, strategic push to streamline the process, cutting median approval times down sharply from 166 to 121 days. Combined with the passage of the GENIUS Act, the likelihood of getting a charter approval grew for technology and crypto focused firms. 

What it means for banks

Of the current applications, four firms have applied for full National Association status, which would allow them to take consumer deposits directly on a national scale and under the federal umbrella. The remaining eight applications were for Uninsured National Trust Charters, which would allow these institutions to gain Federal Preemption, meaning they could operate across all 50 states without needing state-by-state money transmitter licenses.

By pursuing a full national bank charter instead of a restricted trust or state-by-state license, firms are positioning themselves to eliminate the need for sponsor banks and offer their own savings accounts and other products independently. For example, Revolut is trying to build a full-service de novo bank, and will no longer need to rely on its sponsor banks to offer bank-like products and services. Revolut also applied to get FDIC-insured deposits, which would allow them to hold customer checking and savings accounts on their own balance sheet. Regional banks that built business models as fintech sponsors face a threat to their revenue as these firms graduate to their own charters. 

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The drive for total fintech independence is a paradigm shift for the sector. By successfully securing full national bank charters or national trust charters, massive fintech and crypto platforms (such as Revolut, Circle and Coinbase) are cutting out the middleman. They are transitioning from nonbank partners to direct competitors, completely eliminating their reliance on regional sponsor banks (like Lead Bank and Cross River Bank) and keeping 100% of their deposit interest and transaction fees.

This structural transition will reshape the mechanics of the U.S. payment system while introducing potentially new vectors for consumer vulnerability. National trust companies are not subject to the full set of regulations that are generally applicable to full-service commercial banks. For example, national trusts typically are chartered with a condition specifying a minimum dollar amount of capital and, in some cases, a minimum amount of liquidity that must be initially maintained instead of being subject to the generally applicable bank capital and liquidity rules. Only a handful of firms also applied for FDIC insurance, and national trust banks are legally uninsured. However, because they are allowed to engage in non-fiduciary activities (like managing stablecoin reserves and processing peer-to-peer payments), they can offer products that look, feel, and function exactly like a traditional checking account. This presents a massive consumer blind spot. Everyday users may assume their money is safe in the same way as a traditional bank because these national charter banks look and operate in a similar fashion. 

The OCC's fast-tracking of national digital charters marks a significant change to the traditional sponsor-bank era and the beginning of a more federally unified digital economy. By providing tech firms with a direct conduit to the U.S. payment rails and federal preemption, regulators have successfully coaxed shadow banking into the light of federal oversight. Yet, by allowing tech and crypto platforms to operate under the more lenient frameworks of uninsured trust charters rather than commercial bank rules, regulators are walking a dangerous tightrope. The coming years will prove whether this wave drives structural modernization or leaves consumers vulnerable to a new breed of institutional financial risk. 

As companies like Circle, Revolut, and Coinbase secure direct access to federal infrastructure, the traditional walls separating tech, crypto, and banking will permanently dissolve. For the payments industry, it means a combination of innovation and increased complexity; for consumers, it means entering a brave new world where the definitions of a bank, and the safety of their assets, have changed forever.