Bank Charter Surge Reshapes Credit Card Competition

Erebor Bank, a lender that caters to startups, has received the thumbs up from the Trump administration, making it the first national bank charter under the president’s second term in office. The nod of approval likely won’t be the last.

Fintechs and other financial firms are seeking bank charters at an increased rate under this administration, according to a recent Bloomberg report. The race by certain fintechs to transition into banks stands to have significant impacts on credit card issuers and the overall card market.

Patrick Gerhart, President of Banking Operations at Telcoin Digital Asset Bank, knows a thing or two about charters. In November, Telcoin announced that the Nebraska Department of Banking and Finance had green-lighted it to form Telcoin Digital Asset Bank.

Gerhart told us that it took Telcoin two years of diligence before it received regulatory approval to operate as a digital asset bank in Nebraska.

Successfully applying for a bank charter can bring a plethora of benefits to companies.

“For fintech and crypto firms especially, a charter allows you to create stablecoins, move money directly, and serve customers without relying on layers of partner banks,” Gerhart said. “That creates more control, lower costs, stronger trust, and clearer accountability.”

Applications for federal bank charters in 2025 hit their highest mark since 2020.

“It also places fintechs under a regulatory framework that customers and regulators already understand and can depend on,” he added.

These advantages explain why applications for federal bank charters are on the rise. Bloomberg reports that, in 2025, applications for federal bank charters hit their highest level since 2020.

The growth in bank charter applications may be a positive development for consumers, as they could soon have more options when selecting a financial institution that aligns with their goals. The addition of more companies to the U.S. banking space could also lead to lower rates and fees on credit products as companies compete with each other.

But traditional credit card issuers should seek to understand how the emergence of new banks that may operate differently from many of their typical competitors can affect the lending landscape.

Fintechs can seek the assistance of bank partners to issue credit cards to consumers and businesses. But fintechs that pursue bank charters may need to collaborate less with banks to get their card programs up and running. 

As more fintechs seek charters and issue credit cards, credit card issuers could see revenue from issuing credit cards on behalf of fintechs dry up

Bloomberg’s report highlighted that a bank charter can put a company in a position to access funding they can rely on in the form of deposits, which can also be much cheaper than alternative sources of financing.

In turn, a fintech company that has obtained a bank charter may be able to price credit cards they offer more aggressively. They may also have the resources to offer better rewards programs than they did before obtaining a charter.

Credit card issuers that don’t have plans in place to monitor the card programs of firms that have recently secured a bank charter may want to consider developing strategies for that in the near future.

Watch on

Rouzbeh Rotabi, COO and Chief Revenue Officer at payments platform Qolo, told us that credit card companies could lose a substantial amount of spend as more fintechs seek bank charters.

“I think the credit card companies will eventually have to get much better about managing their interest rates or their rewards points to make sure that people want to carry a balance if they’re paying interest to offset the various fintech options that are out there,” Rotabi said.

Of course, more competition can also lead to innovation. Gerhart told us that the influx of companies applying for bank charters may not lead to a sudden disruption in the market, but it will put pressure on legacy banks and financial institutions to modernize their approaches.

“Newly chartered banks, especially those integrating digital assets and blockchain technology, tend to provide more options, perks, and operational efficiency, which pushes the rest of the industry to challenge how it delivers services,” he told us.

Erebor Bank may not be a familiar name to many people in the payments industry. But numerous other companies with more recognizable names in the payments space — including Affirm and PayPal — are seeking bank charters.

Affirm’s CEO, Max Levchin, said the company’s move to apply for a charter is about positioning itself for the long term.

“A banking subsidiary would strengthen and diversify Affirm’s platform, and help us bring honest financial products to more people,” Levchin said in a statement last month.

An increasing number of companies pursuing a bank charter will do more than force traditional card issuers to rethink product strategies. It may make it necessary for them to save money for other expenses.

Experts may not agree on how many fintechs will ultimately be successful in obtaining a bank charter. But the more banks that exist across the country, the greater the possibility that at least a few of them will eventually fail.

Credit card issuers may face challenges in acquiring and retaining employees with more banks competing for top talent.

Banks can face increased costs when a bank shuts down. Banks insured by the Federal Deposit Insurance Corporation (FDIC) are responsible for paying quarterly premiums, and when more banks fail over time, those premiums can increase.

“When FDIC pays out, it has by statute a mandate to go back and have an extraordinary assessment on the living banks to recoup what it paid,” Anna Gelpern, Professor of Law and International Finance at Georgetown Law, said in a report on bank failures.

Credit card issuers could also see their costs around talent acquisition and retention soar as more fintechs seek to become banks and compete for talent to manage new initiatives. But, for issuers, time is on their side.

Gerhart told us the process of applying for a bank charter can take several years from start to finish. 

“There’s the application itself, ongoing dialogue with regulators, capital planning, leadership vetting, systems testing, and policy development,” he said. “These things take time, especially since these companies are carving out a new path.”

The wave of companies applying for bank charters stands to bring many changes to traditional credit card issuers. More competition can lead to higher costs for issuers, but it may also motivate them to innovate and win over new customers.

Credit card issuers that assess shifts in the banking landscape will have an advantage in determining how they not only survive, but thrive, in an evolving card ecosystem.