EC "We’re Just A Technology Company That Happens To Have A Banking License"

"We’re just a technology company that happens to have a banking licence."

I hear this a lot, and don’t like it. Many banks say it these days, and they say it to be cool. To be like a start-up. To be like a Silicon Valley angel investment firm. To be like a young, FinTech unicorn.

However, there is a massive difference between Amazon, Alibaba and Bank of America. Similarly, there is a massive difference between a tech start-up, a fintech start-up and a full-service bank. A start-up can start with almost nothing. No capital, no funding, no backing, no customers, no history, no trust, nothing. And if their idea is good, it might take off. A fintech start-up can start with almost nothing. The only difference between a tech start-up and a fintech start-up is that the latter usually needs more funding and backing thanks to getting a regulatory tickbox. They need that tickbox to be trusted in the financial marketplace but, thankfully, the regulator has made their ticks much lighter and easier to get than they used to be. However, to be a full-service bank, you need all of the regulator’s’ ticks in all of the boxes which is why most fintech start-ups don’t start-up as a bank. Therefore, to call yourself a technology company that happens to have a banking licence makes light of that affair.

I remember hearing a regulator in London talking about the many applications that were being received for bank licences in the UK. Monzo, Starling, Atom, Tandem, Tide, Oaknorth, Clearbank, Railsbank and more were all vying to become the start-ups du jour, and needed the full banking licence to get there. It took them months and years to get the licence, involved many regulatory hurdles, not the least of which is finding the right people to populate their boardroom and leadership team, and required lots of capital. In fact, the regulator quoted that the average fee to get a banking licence for a UK start-up was $30 million. That’s before you even get started up. So, saying that we’re just a technology company that happens to have a banking licence is a falsehood.

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Harry Goldstein 6 months ago Member's comment

Very good article.