US fintech launched by ex-SoFi CEO applies for national bank charter

November 6, 2020.
The Golden Gate Bridge and San Francisco skyline from the Marin Headlands above Sausalito, Calif. (AP Photo/Eric Risberg, File)

The Golden Gate Bridge and San Francisco skyline from the Marin Headlands above Sausalito, Calif. (AP Photo/Eric Risberg, File)

co-founder and former CEO Mike Cagney, ousted from the fintech over a sexual harassment scandal, has applied for a national bank charter for his own blockchain lending startup.

Cagney's startup Technologies said Friday it is seeking a charter from the U.S. Office of the , with an aim of reducing legal and regulatory costs by dealing with only one agency. His effort comes after his former company, SoFi, received preliminary, conditional approval for a charter in October.

A representative from the OCC confirmed to Fastinform that Figure had submitted an application for a national charter but declined to comment further.

Fintechs are increasingly making inroads with regulators in pursuit of bank charters, a move that the traditional banking industry tends to oppose. In addition to regulatory simplicity, a national charter provides financial firms with access to the U.S. Federal Reserve payments system and discount window, as well as other benefits.

“Figure is pursuing the charter to reduce the complexity of our business -- we'll have over 200 state licenses next year without such a charter,” Cagney said.

“By reducing complexity, we can leverage the technology efficiencies we have to deliver financial solutions to traditionally underserved and underrepresented consumers, driving real financial inclusion.”

Figure said it is developing a range of accessible payment and point of sale financing services built on blockchain to bring financial services to unbanked or otherwise underserved customers.

The company's efforts to obtain the bank charter from the OCC will be led by C.D. Davies, the head of lending at Figure. Davies will then serve as CEO of Figure Bank, if granted the charter. He is a banking industry veteran and previously served in executive roles at Citibank and Capital One.

Cagney was accused of sexual harassment and fostering a toxic company culture at the San Francisco-based SoFi in 2017, forcing his resignation while the company was in the middle of applying for an industrial loan charter with the Federal Deposit Insurance Corporation. 

SoFi then withdrew its application shortly after the scandal. Cagney co-founded Figure in 2018, also in San Francisco, and serves as the CEO.

In July of this year, SoFi made a renewed pitch for a banking license to grow its financial capabilities without the need for a bank partner. Now that it has received conditional, preliminary approval, the de novo national bank will be named SoFi Bank, National Association, and will be initially capitalized at $550 million.

Fintechs are increasingly interested in bank charters to compete on a more equal footing with traditional lenders. The OCC lifted its ban on companies receiving charters in 2018, which has led to a spike in applications.

Varo Money was the first U.S. fintech startup to be granted a full-service charter in July, which began operations as Varo Bank in August.

But the process has garnered backlash from traditional banks that fear the competition and regulatory risks that may come from opening up the industry to fintechs. 

The OCC proposed offering a special purpose payments charter for nonbank fintechs, like Amazon and Google, which would grant them access to the U.S. Federal Reserve system and safety net.

Trade groups representing U.S. banks criticized this plan, and urged lawmakers last month to step in and block the proposal. They said the government should protect the financial system and consumers from the potential increase in systemic risk from big tech companies.

--Additional reporting by Carrie Wood