It might feel like there’s a new bank popping up on every corner in America these days. But, the total number of banks in the U.S. has dwindled significantly over the course of the last 30 years. About three decades ago, there were more than 18,000 banks scattered across the country. But today, there are fewer than 6,000 of them, and that figure continues to fall almost every year. There are more banks that have failed in the last decade than there are new banks that have opened.
The Federal Deposit Insurance Corporation (FDIC) is committed to doing something about the large number of banks that are frequently closing.
FDIC chairperson Jelena McWilliams wrote an op-ed piece recently, and in it, she spoke about how there are only 11 new banks that have opened since the start of 2009. She also spoke about how she would like to see this trend change and touched on the need for bank startup activity. And she even presented the idea of the FDIC potentially offering FDIC deposit insurance to financial technology companies in an effort to jumpstart the banking industry.
In the past, the FDIC has seemingly been hesitant to open their arms up and embrace all of the fintech startups that have popped in recent years. But according to McWilliams, the FDIC is starting to recognize that they’re likely going to need fintech startups on their side if they want to begin to see new banks opening up. And one of the ways that the FDIC plans on making this happen is by putting FDIC deposit insurance on the table for some fintech startup companies. Fintech startups that can secure FDIC deposit insurance would be able to go toe-to-toe with traditional banks once they have it.
It remains to be seen how the fintech industry will respond to the FDIC’s willingness to work with fintech startups. If fintech companies were to apply for FDIC deposit insurance, it would mean that they would be held to the same high standards that traditional banks are. That could add a lot of additional costs to their current operations. But it would put many fintech startups on a level playing field with established banks and allow them to compete with them, which could lead to the formation of new banks in many different parts of the country.
If the FDIC starts providing more fintech companies with FDIC deposit insurance, it could change the banking industry forever. It could also lead to more people investing in the various fintech startups that are showing up on the scene every year. Portfolio Financial Servicing Company has worked with some of the leading fintech platforms over the past decade. Contact us today to learn more about how we can help you.