Insight

Chartering Options for Non-bank Financial Service Providers

Alternatives to Traditional Bank Charters

Todd Semanco

Todd Semanco

Partner, Advisory, FS Regulatory & Compliance Risk, KPMG US

+1 412-232-1601

Michael Scarpa

Michael Scarpa

Managing Director, Advisory FS Regulatory & Compliance Risk, KPMG US

+1 212 872 3528

Chad Polen

Chad Polen

Advisory Managing Director, FS Regulatory & Compliance Risk, KPMG US

+1 412-208-6144

Gone are the days of viewing the financial services industry exclusively through the lens of brick-and-mortar banks with traditional products and services. Rapid developments in technology, along with the global pandemic, have fueled disruption in the industry, leading to the growth of existing and the creation of many new Financial Technology (FinTech) and Decentralized Finance (DeFi) institutions. As a step in the journey of these disruptive non-bank industries, new entrants to this space will need to understand the pathways available to be accredited for these new activities.

The evolution of these financial service providers is ushering in a potential new era of regulation, oversight and supervision, and with them, new considerations and challenges. The expansion of the FinTech market has re-awoken old pathways for national certification, sparking opportunity for these new products and service providers. Non-bank financial service providers are beginning to recognize the value and criticality of obtaining charters that will allow them to expand their financial services offerings and provide customers federal benefits and protections.

This comes at a pivotal moment as FinTech and DeFi providers are at the doorstep of mass adoption and will need to quickly adapt to the current and highly uncertain future regulatory framework.

Alternatives to Traditional Bank Charters

There are a variety of alternatives to seeking a full-service national bank charter and the approach and benefits of each differ significantly.

 Explore the options in our publication, including:

  • Money Transmitter Licenses
  • Wyoming’s Special Purpose Depository Institutions (SPDIs)
  • Industrial Loan Companies (ILCs)

In the face of increased regulatory scrutiny, whether from state or federal regulators, non-bank financial service providers will need to consider their compliance management system and ensure that a strong regulatory and compliance control environment is present across their operations, risk management, and internal audit functions (i.e. three lines of defense).

Non-bank financial service providers must embrace enhancing their compliance management infrastructure in order to prove their readiness to assume the responsibilities of a chartered financial service provider. Partnering with a professional services firm that has the resources, experiences, and expertise to navigate today’s challenges can create a significant advantage for any financial institution.