Mercury’s Bank Charter Bid Signals a New Competitive Threat to Card Issuers

Mercury, a fintech company that offers financial solutions to entrepreneurs and startup organizations, has submitted an application to the Office of the Comptroller of the Currency for a national bank charter, according to a recent press release.

The move by the fintech, which currently offers business credit cards to account holders, stands to bring more competition to credit card issuers that serve similar segments of the market.

Mercury already boasts more than 200,000 customers, including eCommerce companies and venture capital firms. But operating as a national bank with direct regulatory oversight will allow the company to fortify the trust it has built with customers, the fintech said in its release.

The company has also applied with the FDIC for federal deposit insurance. Immad Akhund, Co-Founder and CEO of Mercury, noted in the press release that transitioning to an FDIC-insured national bank fits with the fintech’s vision and will position it to provide better experiences to its customers at scale.

Mercury currently works with a partner bank to offer a business credit card to its account holders.

“We’ve built Mercury for ambitious companies and individuals,” Akhund said. “Once we receive regulatory approval, a charter will let us deliver greater stability, long-term confidence, and trust, while continuing to redefine what radically different banking means.”

Patriot Bank is the issuer for Mercury’s business credit card, which offers cardholders the ability to earn 1.5% cash back on purchases they make with the card. But pending approval of its applications, Mercury may move to issue credit cards on its own, which would give the company more control over underwriting and pricing decisions.

Mercury isn’t the only fintech that has considered applying for a bank charter lately. The Financial Brand recently reported that a number of new banking charters involving fintechs may be on the way, thanks in part to shifting regulatory policies.

A growing number of fintechs seeking banking charters could radically alter the competitive landscape for credit cards. For example, should Mercury become a bank, the company may move to expand its credit card offerings. 

If the company no longer has to share interchange with a partnering institution, it may have the resources necessary to increase the value of its rewards program and take business away from traditional issuers.

In addition to applying for a national bank charter, Mercury announced that it is appointing Jon Auxier to be the company’s Chief Banking Officer. If Mercury receives approval on its application, Auxier will become the company’s CEO and President.

Mercury may seek to change the structure of its credit card program if the company’s application for a national bank charter receives approval.

Auxier previously held the CFO role at SoFi Bank, where he helped the company in its successful pursuit of a national bank charter.

As a bank, Mercury may be able to move faster when it comes to refining product features and innovating, particularly if it doesn’t need to confer with partners over program changes.

Auxier commented in the release on the company’s current position and its potential as it takes steps toward becoming a bank.

“Mercury is profitable and has built a strong balance sheet with a scaled and successful business,” Auxier said. “Becoming a bank will build upon our strong foundation and let us innovate with more precision and accountability.”