Brex Becomes Latest FinTech to Apply for Bank Charter
For years, several FinTechs have considered or actually applied to open a bank of their own. The latest in this line is Brex. According to a Brex press release, the company has submitted an application with the Federal Deposit Insurance Corporation (FDIC) as well as the Utah Department of Financial Institutions (UDFI) to establish Brex Bank. This bank would be a wholly-owned subsidiary of Brex and would be located in Draper, Utah. If approved, the move would allow Brex to expand its current offerings, including the ability to introduce additional credit products and FDIC-insured deposit account options.
As part of the announcement, Brex also revealed that it had hired Bruce Wallace to serve as CEO of the proposed Brex Bank. Previously, Wallace worked at Silicon Valley Bank, serving as Chief Operations Officer, Chief Digital Officer, and Head of Global Services. Meanwhile, Jean Perschon has been tapped to be CFO of Brex Bank.
Brex offers business banking accounts and credit cards — which are currently issued by Emigrant Bank. These products are complemented by financial software tools and integration to further help small business owners manage their money. According to TechCrunch, the startup has raised a total of $465 million in venture capital to date, including a $150 million Series C extension last year.
In a statement regarding Brex’s banking plans, Wallace said, “Brex and Brex Bank will work in tandem to help [small businesses] grow to realize their full potential.” Wallace added, “We thank the FDIC and UDFI for their efforts and guidance in this process and look forward to the next steps.”
Brex’s banking application comes nearly six months after Varo became the first FinTech to be approved for a national bank charter. Soon after that, SoFi received conditional approval from the Office of the Comptroller of the Currency to also establish a national bank. Elsewhere, in March of last year, the FDIC conditionally approved Square’s Industrial Loan Company charter application as did the UDFI.
With Brex becoming the latest FinTech to pursue full-fledge bank status, it seems like only a matter of time before other startups follow the same path. Although partnerships with existing institutions can help firms get off the ground quickly and prove their concept, in the long term, the banking charter strategy can give FinTechs greater control and options. Of course, with few companies already through this process, it remains to be seen if there are downsides to such a pivot. Therefore, as more financial technology startups are approved, expect that there will be plenty of eyes watching to see if this path is indeed the future or not.