Why fintechs are transitioning from partners to principals in banking - Tearsheet

"Fintech's core value proposition was that financial services could be delivered without owning a bank charter. That model produced an entire generation of financial companies. But it also created a structural dependency: fintechs could innovate quickly and focus on software, distribution, and user experience, yet the underlying regulatory authority, lending licenses, deposit insurance, and access to the financial system, remained largely with partner banks."

"Industrial loan companies (ILCs) can be owned by commercial companies while still operating as FDIC-insured banks, allowing non-bank firms to enter banking without becoming traditional bank holding companies. For Affirm, the charter could change the economics and structure of its lending platform. The firm can reduce reliance on partners and take greater control over the credit lifecycle, better manage funding costs, expand the scope of its products, and align underwriting, funding, and servicing under a single roof."

Fintech companies historically operated without bank charters, relying on partner banks for regulatory authority, lending licenses, deposit insurance, and financial system access. This model enabled rapid innovation in software and user experience but created structural dependency on banking partners. Beginning in early 2026, this architecture is shifting as prominent fintechs pursue bank charters. Affirm applied for a Nevada-chartered industrial loan company to control its lending stack and reduce partner reliance. Payoneer filed for a national trust bank to support stablecoin infrastructure. Upstart applied to become a national bank. Industrial loan companies allow commercial companies to operate as FDIC-insured banks without becoming traditional bank holding companies, enabling fintechs to manage funding costs, expand products, and consolidate underwriting, funding, and servicing operations.

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