Affirm Seeks Banking Charter as Capital One Moves to Acquire Brex in Fintech Consolidation Wave
Buy-now-pay-later lender Affirm has applied for an industrial loan company charter, marking the latest fintech firm to pursue direct banking powers, according to a February 4 podcast discussion between fintech analysts Jason Mikula and Alex Johnson.
The charter application comes as Capital One announced plans to acquire Brex, the corporate card and expense management startup, in a deal that signals continued consolidation in the fintech sector. The twin developments underscore how the industry's regulatory landscape is shifting—with some fintechs seeking to become banks themselves while others exit to traditional financial institutions.
An ILC charter would allow Affirm to take deposits and make loans without the full regulatory burden of a traditional bank charter, though the company would still face federal oversight. The move follows a pattern of fintech firms seeking more control over their banking operations after years of relying on partner banks, a model that has faced increased regulatory scrutiny.
The Capital One-Brex transaction represents a notable pivot for Brex, which had positioned itself as a disruptor to traditional corporate card issuers. The startup raised significant venture capital to build expense management tools and corporate cards aimed at startups and mid-market companies. Capital One's acquisition suggests the card giant sees value in Brex's technology platform and customer base, though financial terms were not disclosed in the podcast discussion.
The deals emerged against a backdrop of renewed political attention to credit card economics. Mikula and Johnson discussed proposals for a 10% interest rate cap on credit cards and the re-emergence of the Credit Card Competition Act, questioning whether these legislative efforts represent serious policy pushes or negotiating tactics.
The podcast also covered Coinbase CEO Brian Armstrong's stance on crypto market structure legislation, with the hosts suggesting Armstrong had reversed course on previously supported regulatory frameworks. The discussion touched on how HBO's banking drama "Industry" has begun incorporating fintech themes, though the hosts warned of spoilers for viewers.
For finance chiefs, the Affirm charter application and Capital One-Brex deal highlight a fundamental question facing the industry: whether fintech innovation ultimately leads to new banking institutions or simply provides technology and customer acquisition channels for incumbents. Affirm's pursuit of a charter suggests at least some fintechs believe the regulatory burden is worth the control and economics of direct banking relationships.
The ILC charter route has historical precedent—companies like Toyota Financial Services have used industrial loan company structures to offer banking services while maintaining focus on their core business. For Affirm, which has built its business on point-of-sale lending partnerships with merchants, a charter could reduce reliance on bank partners and improve unit economics.
Whether regulators approve Affirm's application remains uncertain, particularly given the Federal Deposit Insurance Corporation's historically cautious approach to ILC charters for non-traditional applicants. The outcome could signal whether fintech firms can successfully cross the regulatory moat that has long protected traditional banking franchises.
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