The Public Ledger: Every Fintech Becomes a Bank Eventually

Hello, Fintech Friends!

I got into financial services during the golden age of peer-to-peer lending. LendingClub was going to disintermediate banks by connecting borrowers directly to investors. Zopa was doing the same thing in the UK. The pitch was elegant: strip out the bank, pass the savings to both sides. No branches, no licenses, no bloated cost structure. Just software and credit models.

It didn't last. Zopa got its UK banking license in 2020. LendingClub got a bank charter in 2021. The companies that were supposed to kill banks became banks. And those that didn’t went out of business or got acquired.

This week, Revolut finally got its UK banking license approved after years of regulatory back-and-forth. And Upstart, the AI lending company that spent a decade insisting it was a platform, not a lender, applied for a national bank charter. Two very different companies, same destination.

The reason is simple, and it's the same reason every time: funding costs. A fintech that isn't a bank has to borrow money or find partners willing to lend their balance sheet. That works when rates are low and capital is abundant. When rates rise or partners get nervous, the whole model gets expensive fast.

Upstart learned this the hard way when its loan buyers pulled back in 2022 and the stock dropped 90%. A bank charter means deposits, and deposits are the cheapest, most stable funding source in finance. “You can’t beat balance sheet lending”, as my banking colleagues used to say.

The first generation of fintech was built on the idea that you didn't need to be a bank. Perhaps, it was a wrong thesis all along? Cheap deposits, regulatory clarity, and access to payment rails aren't just bureaucratic relics. They're competitive advantages. LendingClub figured it out. SoFi figured it out.

Who’s next?

Jev
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Revolut got its full UK banking license from the Prudential Regulation Authority this week, ending a process that started in 2021. Five years. The company had a restricted license since 2024, which let it test banking systems with a small group of customers but capped total deposits at £50,000. That cap is now gone. Revolut has 13 million UK customers and 70 million globally. It can now hold deposits, lend against them, and compete head-to-head with the high street incumbents. Boom!

Read more: British fintech Revolut gets full banking licence

Upstart announced it's applying for a national bank charter through the OCC and FDIC, with a separate Fed application to become a bank holding company. Incoming CEO Paul Gu called it "the first bank built from the ground up on AI." The details tell a more careful story. Annie Delgado, Upstart's Chief Risk Officer, would run the bank as CEO of Upstart Bank, not Gu. The choice says that Upstart knows regulators care more about risk management credentials than AI pitches.

Read more: Upstart to Apply for National Bank Charter

Klarna's post-IPO lockup expired last week, unlocking 335 million shares (90% of the total) for trading. The stock went up 15%. That's the opposite of what lockup expirations are supposed to do. The conventional worry is that early investors dump shares the moment they can. But Klarna's major holders, Sequoia among them, didn't file any sale notices with the SEC. General Atlantic and DST had already exited long before the IPO. Onwards.

Read more: Klarna’s Post-IPO Lockup Period Expires for Early Investors