U.K.-based FinTech firms are ramping up plans to acquire American banks to boost lending abilities.
As the Financial Times noted Monday (Sept. 2) in a report on this trend, this is happening as U.S. financial regulators are showing a new openness to mergers under President Donald Trump’s administration.
Among the U.K. FinTechs considering acquisitions are Revolut and Starling. By purchasing nationally chartered U.S. banks, these companies could obtain banking licenses and the ability to offer lending in all 50 states.
A source familiar with the matter told the FT that Revolut, the largest FinTech in Europe, had approached advisors about buying a U.S. bank. This follows reports over the past few weeks that the company was stepping up its efforts to enter the U.S. banking space.
Declan Ferguson, Starling’s chief financial officer, said the company was mulling a U.S. banking license application but that an acquisition could be faster: “We’re considering both paths, although we are probably more inclined towards acquisition.”
Such a deal might be easier as regulators relax their policies on banking mergers. For example, Michelle Bowman, vice-chair of supervision at the Federal Reserve, signaled plans for a more bank-friendly approach, including quicker greenlighting for mergers, soon after being confirmed in the position in June.
The two other chief U.S. bank regulators, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), have pulled back their guidance around mergers.
“The window is open and it may not stay open, so it would be best to move now,” David Portilla, a partner specializing in financial institutions at U.S. law firm Davis Polk, told the FT.
British business lender OakNorth purchased the Michigan-based Community Unity Bank in March, a deal its chief risk officer Mark Steele said had given it a “foothold” in the U.S.
“Speed was part of the rationale…but it was more that you have a technology, a workforce and a frame to build from, rather than building from the ground up,” said Steele.
This is all happening as the relationships between banks and FinTechs are becoming more closely intertwined.
For example, research by PYMNTS Intelligence has found that 62% of banks are actively exploring partnerships with FinTech firms to boost their cross-border payment solutions.
“This integration signals a trend in the banking industry where collaboration with FinTech firms is becoming a key strategy for driving innovation,” PYMNTS wrote earlier this year.
Source: https://www.pymnts.com/
