The Perfect Storm: Why is it Raining Banks Now?

Published September 24, 2026

The Perfect Storm: Why is it Raining Banks Now?

Every single month this year, a new bank charter application, rejection, or acceptance has been announced in the US: Coinbase’s approved bank charter application; Block’s (parent company of Square and Cashapp) second bank charter application; Chime buying a bank; Wise, the international remittance company, having its bank charter rejected; Nu, the Brazilian-based bank, applying for a US bank charter; Klarna's bank charter application. And if I wanted to fill this page with more examples, I literally could! How did we get here, and what could this mean for the average consumer?

The first act

This story actually starts in 2008. Paypal was expanding into small business lending because the financial crisis was causing banks to not lend out as much money. However, non-banks cannot issue commercial bank loans. So, they acquired a company called BillMeLater which was partnering with Webbank (a bank in Utah that you may have never heard of). Paypal/BML handled the underwriting and servicing, while Webbank issued the loans. Now, Paypal has solidly established that a software company can offer bank-like services by partnering with a real one!

The second act

Let’s fast forward to 2010, Congress is working on the Dodd-Frank Act. Last minute, Senator Durbin wants to amend the bill to cap debit card interchange (so the money banks get every time we swipe our cards) for banks with more than $10B in assets. The entire bill passed and by 2011, the Federal Reserve was responsible for enforcing this. So technically if you’re a small bank in Wyoming that nobody has heard of, because you have less than 10B in assets, you can keep collecting your market rate interchange (so 1% or more) for debit cards, but if you’re a JP Morgan, you’re capped at like $0.22 cents.

This opens up a wider revenue stream for non-banks because they start to work with smaller banks exclusively to take advantage of this. For example, Cash App has the 4th largest debit card program in the U.S. After Wells Fargo, JP Morgan and Bank of America. Cash App has now established that you can be the 4th largest debit card program in the U.S, and not be a real bank as long as you share some of your interchange with a real bank.

The third act

Now it’s 2014, and two people saw this unfolding and saw a business opportunity. What if we built a software company that already has a relationship with a real bank (or maybe even multiple). So that, instead of Chime or Cashapp finding a tiny bank in Montana, doing all the paperwork with them, they would just come to us, and be able to start collecting deposits and doing bank stuff as quickly as possible. AKA, what if selling access to banks became a source of revenue? They called it Synapse, and it worked? It became a unicorn (aka private company valued at a billion dollars). They worked with Honey, Mercury, Dave, and many, many companies you’ve never heard of before.

But the execution was not good. On the backend, they didn’t do a good job of organizing funds and deposits across their different banking partners and software company clients. There was such a huge hole in their records that their biggest customer left them and their banking partner did too. They filed for bankruptcy, laid everyone off, and the company ceased to exist.

Till today the $85m that people deposited is still missing and unaccounted for. Thus unlocking a new concern that an intermediary between a non-bank and a real bank could be a liability for both businesses.

The fourth act

It’s now 2020 and a software company decided to ask the question, what if we JUST became banks? Why deal with a middleman that can blow up your company or find a tiny bank in Ohio to work with, when we could just do the paperwork ourselves, pay the money and become a bank! And it actually worked. Varo was the first software company in the US to become a bank.

Now the story becomes interesting.

The fifth act

It is summer of 2025, and Trump appoints Jonathan Gould as the comptroller of the OCC, the same organization that looks at and approves or rejects bank charter applications. And he literally says “the OCC is open for business again”. His take is that the OCC must address the decline in the number of banks with less than $1B in assets that took place post 2008. To him, the more types of banks we have, the more variety of the type of american that is served we will have.

Thus the perfect storm had arrived. A regulatory body led by someone who is very open to new banks being formed, a company that has made software companies and banks wary of working with a middleman, interchange revenue being unbounded for smaller banks (well as unbounded as 1% is) and an example that a software company can become a bank, (oprah voice) everybody’s getting a bank!!!!!!!!!!!

The present

Where do we go from here? There’s lots of predictions! There’s the argument that Comptroller Gould is right, we should have more banks as it will make our banking system in the US more relevant and trusted. There’s the free market argument that competition is a good thing, more banks will pressure each other to provide quality services to their customers. There’s the patriotic argument that if a company from Brazil is coming all the way to the US to apply to become a bank, is this pushing out American community banks? There’s the cynical argument that all these banks could one day need to be bailed out by the FDIC, and that’s where this is all headed.

I’m choosing to remain optimistic because I understand the benefits of competition. Zelle was created because banks saw that Venmo was eating their lunch. But I’m a bit worried about community banks, and if they will be able to thrive amongst these venture backed software company banks or if they will crumble under the pressure.

Anyway, I gotta catch my flight to meet with a man about buying a bank.

*** If any editors happen upon this, please accept this as my official pitch to cover this from the consumer angle a la ‘what the average consumer doesn’t know about why it’s raining banks’, fank yew!