Upstart Seeks Regulatory Blessing to Become a Bank

Digital lender Upstart has become the latest U.S. FinTech seeking a banking charter.

The company announced Tuesday (March 10) that it had applied to federal banking regulators the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to establish an insured national bank.

The personal loan platform also plans to apply to the Federal Reserve for permission to become a bank holding company, Upstart said in a news release.

“The time is right to launch the first bank built from the ground up on AI,” said Paul Gu, Upstart’s chief technology officer and incoming CEO.

“Applying for a bank charter is the natural evolution of our business as we’ve grown in size, scale, and product offerings. This will allow us to save borrowers even more time and money, and streamline our partnerships with banks, credit unions and institutional credit funds.”

With a banking charter, Upstart says it will be able to lower operational, regulatory and financial costs and complexity for itself and its third-party capital sources. Annie Delgado, Upstart’s chief risk officer, is the proposed CEO of the new bank.

Writing on the company’s website, Delgado said the charter will help Upstart reach more customers. She noted that in 2024, roughly 40,000 consumers were unable to apply for loans with Upstart because its products weren’t available in every jurisdiction. The company’s small dollar loan program is also unavailable in about 20% of the U.S.

Upstart’s banking plans put it in the company of a number of other FinTech firms seeking or planning to seek banking charters from U.S. regulators, including Revolut, PayPal, Checkout.com and Affirm.

“Taken together, these moves point to a structural change in how nonbanks seek permanence inside the regulated financial system, with government approval becoming viewed as an asset, not an obstacle,” PYMNTS wrote in January.

Research by PYMNTS Intelligence has found that 62% of Generation Z consumers would consider using a neobank as their primary bank account provider, “a striking level of openness that outpaces all other generations,” as covered here in October.

A bank charter “is not a trophy, and it certainly isn’t a product label, but it’s a public trust,” Rodney E. Hood, former acting comptroller of the currency, said in an interview with Competition Policy International, a PYMNTS company, in January.

“A federal charter should never be construed as an end run around supervision, and it should certainly never be a pathway to scale without accountability,” Hood added.