Pub. 6 2018 Issue 2

www.uba.org 8 “The fintech ecosystem that sprung up in the wake of the 2008 financial crisis has grown and matured. The early companies developing and marketing fintech applications (fintechs) set out to disrupt or displace traditional banks. But fintechs have largely come to see banks as partners in providing innovative products and services, helping even to modernize banks’ internal systems. Now, partly due to the challenges of operating under a patchwork of state and federal laws and regulations, fintechs are considering becoming banks themselves,” according to Kevin Petrasic, a banking partner in the Washington, DC office of White & Case LLP. Industrial Banks: What Are They and How Do They Impact the Economy? By Charlie Knadler, President & CEO, EnerBank USA In a recent article, Petrasic also stated that an industrial loan company (ILC) charter is an attractive option for fintechs to consider. His analysis is absolute- ly correct. An ILC is the perfect route for the appropriate fintech operations with a sound business plan. This charter requires the same consumer protections and compliance regulations as any other bank, while allowing access to a national customer base. This results in the infusion of credit for families and businesses across the country. ILCs are a win-win for Americans. So what's an ILC? Let's take a step back and define what ILCs are, why new charters for them have been frowned upon by the FDIC over the last decade, and the new potential for them. ILCs began in the early 1900s, with small niche lenders provid- ing credit to their own customers, many low-to-moderate income workers who generally struggled to obtain consumer loans from commercial banks. Over the years, these industrial banks got larger (much larger) and began of- fering more products and services.