SmartBiz became the first Fintech Bank and financial-technology firm to receive approval to act as a bank since President Donald Trump took office. The achievement is a potential shift in the financial industry, opening the door for other fintech firms to attempt to find a place in the banking world.

The Federal Reserve Bank of Chicago and the Office of the Comptroller of the Currency (OCC) have authorized SmartBiz to purchase Centrust Bank NA, located in Northbrook, Illinois. The fintech company made the announcement in a press release on Monday, the first time a fintech has become a bank since 2021.

A New Fintech Banking Move

The road to becoming a full-fledged bank from Fintech is a long and arduous one, with significant regulatory hurdles. No fintech companies received such authorizations during the Joe Biden presidency, so SmartBiz's achievement is particularly significant. Fewer than a dozen firms, including LendingClub Corp. and SoFi Technologies Inc., have received banking charters in recent times.

Becoming a bank gives fintech firms such as SmartBiz access to lower-cost capital from insured deposits. It also gives them better relationships with regulators, ensuring they remain stable and compliant. This shift can incentivize more fintech firms to become banks in the rising Fintech Bank industry.

SmartBiz CEO Evan Singer cited the mission of the company to assist small businesses, an area that often is not well-serviced by conventional banks. "The reason we're doing this is ultimately to serve small businesses really well that aren't being well-served today by banks around the country," Singer said.

Regulatory Perspectives and Industry Influence

Acting Comptroller of the Currency Rodney Hood saw the significance of this approval. He stated that a "safe, sound, and fair fintech business model has a place in today's federal banking system." However, a Federal Reserve representative did not wish to comment on this.

SmartBiz gained popularity for helping small businesses secure loans during the pandemic because many people needed them. The US Chamber of Commerce reported that 5.4 million new business applications were submitted in 2021, showing the need for easy financial help.

The artist said that the process of becoming a bank started three years ago. There was a formal application submitted to the OCC in October 2023, and another was submitted to the Federal Reserve in February 2024. The company hired industry veterans like Tim Bogan and Joe Schenone, who both played important roles in LendingClub's bank acquisition, to help with the process.

What's Next for Fintech Banking

Industry observers say SmartBiz's success could be the beginning of a bigger trend. Michele Alt, a partner with Klaros Group and someone who worked with SmartBiz, believes the approval process in the Trump administration could become more lenient for other fintech firms. "Four years of regulators raising barriers, the barriers are being removed again," she said.

With fintech companies always coming up with new ideas, the success of SmartBiz would inspire even more companies to get banking licenses, transforming financial services. Given that regulations continually change, the Fintech Bank hybrid concept would be an important aspect to the business industry in the upcoming years. Approval of SmartBiz as a Fintech Bank is an important step that may impact future choices when it comes to regulations.