A new wave of bank charters set to roil the industry

A wave of new bank charters—driven mostly by fintechs, non-traditional firms, and even insurance-linked newcomers—presents both acute threats and unique opportunities for incumbent banks and insurance companies in 2025. To maintain relevance and defend market share, traditional institutions must quickly adapt to a rapidly evolving regulatory and competitive environment.​

Why New Charters Are Surging

The surge is attributed to three intertwined trends:

• Fintechs’ increased scale and maturity, allowing them to pursue full charters for strategic control and cost-effective funding.

• A regulatory window that is unusually open, as US agencies like the FDIC and OCC currently signal greater receptivity to new applicants—particularly for de novo banks, industrial loan companies (ILCs), and trust banks.

• Fintechs and nonbanks seeking to switch from sponsor-bank reliance to direct control over banking rails, aiming for higher margins, more stable funding, and product flexibility.​

Risks for Incumbents

• New entrants often target niche segments neglected by larger banks, leveraging data, technology, and agility to outpace incumbents in underserved markets.​

• Broadening regulatory access could lead to “regulatory double standards,” where lightly regulated entities compete with incumbents—eroding margins, regulatory arbitrage, and heightening compliance risks.​

• Insurance companies face parallel threats from insurtechs pursuing novel charter structures—those who can bundle deposit, lending, and risk products under a single, tech-driven umbrella may outflank slow-moving incumbents.

• A select group of scaled fintechs may become major banking or insurance providers, potentially reshaping the power structure of the sector.​

Defensive Strategies for Banks and Insurers

1. Double Down on Digital-Centric Operations

• Accelerate full-spectrum digital transformation by building or acquiring scalable, cloud-based core systems.

• Deliver seamless, omni-channel experiences—use customer analytics and hyperlocal targeting to preempt niche disruptors.​

2. Strengthen Strategic Fintech Partnerships and M&A

• Move beyond simple vendor relationships; pursue deep, win-win partnerships with fintechs, offering mutual access to customer bases, tech infrastructure, and data.

• Proactively consider minority investments, joint ventures, or outright acquisitions of promising fintech startups before they scale independently.

• For insurers, similar approaches towards insurtech partnerships, captive structures, and digital MGAs can protect and expand market reach.

3. Innovate Products and Ecosystems

• Launch new loyalty, embedded finance, or risk advisory services targeted precisely at segments most vulnerable to fintech encroachment.

• Explore new product bundles—pairing banking, lending, payments, and even insurance in a unified ecosystem, leveraging trust in established brands to reduce customer flight risk.​

4. Advocate for Regulatory Parity

• Mobilize industry associations to demand “same activity, same regulation” parity, reducing opportunities for arbitrage and ensuring public trust.

• Participate in regulatory sandboxes and standards-setting bodies to help shape—rather than simply react to—the evolving compliance regime.​

5. Reinvent the Hyperlocal Banking/Insurance Experience

• Use local data, media, and community engagement to create unique value propositions—emphasizing relationships, specialized advice, and community development that digital-only challengers struggle to replicate.

• For both sectors, leveraging hyperlocal economic data and local presence counters the “one-size-fits-all” model of many new entrants and aligns with rising post-pandemic community values.

6. Focus on Trust, Security, and Risk Management

• Emphasize highly visible investments in cybersecurity, fraud prevention (including agentic AI threats), and transparent data privacy—areas where incumbents can outperform less-proven competitors.

• Insurance companies should highlight robust claims servicing and long-standing regulatory compliance as advantages over untested challengers.

Specific Plays for Insurance Companies

• Emulate or partner with tech-driven “neo-insurers” or hybrid platforms, offering flexible microcoverages, usage-based insurance, and rapid quote/claim systems.

• Embed insurance offerings in digital banking and lending products—creating seamless, value-added solutions not easily matched by mono-line fintechs.

Conclusion

The proliferation of new charters is an existential signal: the competitive field is opening to more players, often with technology, data, and niche customer expertise as core strengths. Incumbent banks and insurers can avoid obsolescence and even prosper—if they act decisively to partner, digitize, innovate, and locally differentiate, while leading on regulatory parity, risk management, and customer trust.​