More Banks!
Happy Monday, Fintech Fans!
We don’t have professional sports teams in Montana. We have college football.
And we don’t have dozens of colleges in Montana. We have two: the University of Montana and Montana State University.
The football teams from those two schools have played each other 125 times since 1897. They haven’t played each other more than once in a season since 1913, and they have never played each other in the playoffs, ever.
Until this weekend, when the #2-seeded MSU Bobcats played the #3-seeded UM Grizzlies in the FCS playoff semifinal game in Bozeman.
I tell you all of this so that you will understand how nervous and distracted I was all last week, how excited I was to attend a game where tickets in my section were being resold for thousands of dollars, and how elated I was when, after a tight back-and-forth game, the Bobcats blew it open in the 4th quarter and won the game, 48-23.
Delightful. Absolutely delightful. When sports go your way, there are few better feelings in the world.
However, let us now return (as the MSU Bobcats undoubtedly are) to a 1-0 mindset and see if we can knock out one last Fintech 3-2-1 for 2025.
- Alex
The Banks of the Marne in Winter (1866) by Camille Pissarro.
3 FINTECH NEWS STORIES
#1: More Banks! Copy anchor linkCopied
What happened?Copy anchor linkCopied
Fresh off the OCC approving (conditionally!) five national trust bank charters and the FDIC approving Erebor’s application for deposit insurance, two more fintech companies have thrown their hats in the ring.
PayPal Holdings Inc. applied to become a bank in the US, looking to take advantage of the Trump administration’s openness to financial-technology companies entering the banking system.
The payments-focused firm submitted applications to the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions to form a Utah-chartered industrial loan company, PayPal said in a statement Monday.
And Mercury:
Digital banking firm Mercury Technologies Inc. has applied for a national bank charter, joining a wave of companies seeking to secure a coveted license under the Trump administration’s relatively permissive approach to fintech regulation.
Mercury said Friday that it submitted applications to the Office of the Comptroller of the Currency for a national bank charter and to the Federal Deposit Insurance Corp. for deposit insurance. As a chartered bank, the 8-year-old company would be able to provide banking services directly rather than relying on partners.
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Well, this is what happens when banking regulators make it abundantly clear that they are open for business: more companies ask to become banks!
The bank trade associations aren’t super thrilled, but personally, I’m excited about this trend. We need more new banks, particularly new banks with deep pockets and lots of expertise in technology and product development. It’s the best way to continue increasing the level of competition in the market while keeping a lot of the risk within the supervisory perimeter.
(Editor’s Note — This isn’t to say that I have zero concerns about the quality of bank supervision under this administration. I certainly do have concerns, but I also think more banks will, in the long run, be good for the ecosystem.)
So, what will these new companies do with their bank charters, if they get them?
Let’s take them one at a time, starting with PayPal.
Put very simply, PayPal is trying to be Block. It wants to acquire a comparatively narrow bank charter (ILCs are limited in what they can do) in order to increase its profit margins in a few specific and already-scaled-up product areas (like small business lending, which it has done roughly $30 billion worth of business in since 2013) while giving itself more optionality for the future (PayPal has hinted that it might start offering high-yield savings accounts). This is exactly what Block has been doing since it launched its own ILC — Square Financial Services — in 2021. The question for PayPal, which can, in simple terms, be thought of as a bigger, less organized Block, is whether it can execute on this banking initiative while keeping the many other balls that it’s currently juggling (merchant enablement, Venmo, stablecoins, etc.) in the air. Consider me mildly skeptical.
Now let’s get into Mercury.
For a while there, it really seemed like Mercury was trying to compete with Ramp and Brex. In 2024, the company leaned heavily into the software side of its business, launching bill pay, accounting automations, invoicing, and expense management. At the same time, Mercury CEO Immad Akhund was downplaying the importance of being a bank, telling Eric Newcomer:
People want to feel like their money is safe, and people want a great product. And they don’t care too much if Mercury is a bank or not. And actually, I think we can provide a much safer product by not being a bank.
That’s … very different than what he’s saying now, according to Bloomberg:
“Trust is a big deal,” Mercury co-founder and Chief Executive Officer Immad Akhund said in an interview. “Mercury is a better product than an incumbent bank, but the one thing they can still say is ‘Mercury’s not a bank.’"
On the surface, it’s pretty difficult to square those two quotes, which were given less than two years apart from each other. However, I think the actual answer here is fairly straightforward. Mercury had no chance of getting a bank charter in 2024, but heading into 2026, it has an excellent chance.
My two questions:
- How will getting a bank charter (assuming it happens) impact Mercury’s roadmap? In the interview with Newcomer, Akhund talks about the advantage of being a bank if you are trying to grow a lending business, so I’d imagine that will be a priority. Mercury also recently launched personal banking, which I assume it will be focused on growing. Overall, it seems likely that Mercury will try to build itself into a modern SVB, rather than continuing to push in the Ramp/Brex software-focused direction. It will have some competition on this front, however, with Erebor (now approved for a national bank charter!) targeting the same customer segments.
- Will Mercury’s approach to compliance be compatible with regulators’ expectations? If you read Fintech Business Weekly, you likely know that Mercury has been bad (perhaps willfully so) at regulatory compliance for much of its existence. It was, for example, a principal member in the Synapse/Evolve fiasco, which would give me a slight pause if I were the person at the OCC responsible for reviewing its bank charter application. Will we see a more drawn-out review process for its application? Will a conditional approval (if it happens) come with a few more conditions than normal? We shall have to wait and see!
#2: There’s Only One PegasusCopy anchor linkCopied
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Mesa, which offered a credit card that rewarded homeowners for paying their mortgages, has shut down its card:
A message on the Mesa website states that as of December 12, “all Mesa Homeowners Card accounts are closed,” adding, “All credit cards have been deactivated and you are no longer able to make any new purchases or earn Mesa Points.”
A Mesa FAQ about the shutdown described this as “a business decision to close the Mesa Homeowners Card Program entirely.”
So what?Copy anchor linkCopied
I don’t know the details on what happened here, but it’s not too difficult to guess.
Mesa launched in late 2024 as, essentially, “Bilt for mortgages.” Customers signed up, linked their bank accounts, and started using the Mesa Homeowners Card. You couldn’t actually use the card to pay your mortgage (no mortgage servicer would sign up to pay the interchange fees), so Mesa would look at your linked bank account for outgoing transactions that looked like mortgage payments. To actually earn points for those mortgage payments, Mesa required cardholders to meet monthly minimum spending requirements on the card for non-mortgage spending (which earned rewards), and Mesa capped the total number of points annually that cardholders could earn from paying their mortgages.
Mesa raised $9 million in equity and debt in September of 2024, and another $24 million in equity and debt just four months ago.
I’ll admit to being a bit surprised that Mesa ran out of money so fast (how much of that last $24 million was equity?!?), but I’m not surprised that Mesa ran out of money and was forced to shut the card down.
Giving consumers credit card reward points for large payments that they can’t put on their credit cards is a stupid fucking business model. The only reason you might think otherwise is that Bilt — the company that pioneered this model with renters and is now bringing it to homeowners — has been very successful.
However, as I have previously warned, Bilt’s success is not replicable. It is due to a combination of outstanding timing (there was a lot of uncertainty in the housing market during the pandemic), leverage (renters have lots of leverage with landlords, homeowners have none with mortgage servicers), and Bilt CEO Ankur Jain’s personal network and dealmaking prowess (much to the eventual dismay of Wells Fargo). Here’s what I wrote back in July:
If you want to assemble an entirely new loyalty ecosystem that can compete with the likes of American Express and JPMorgan Chase, and that revolves around an activity (paying rent with a credit card) that makes no economic sense on its own, you probably should make sure you have the ability to personally call the CEOs of every major airline and hotel.
We use the term “unicorn” in tech to describe a rare breed of private company, one that has achieved a valuation of $1 billion or more. We can argue whether that term is still fit for purpose, given the growth of the venture capital ecosystem over the last decade. However, the broader point is that while unicorns are rare, there are more than one of them out there.
Bilt isn’t a unicorn. It’s more like Pegasus, sired by the Gods and the possible bane of any who dare to ride him.
Mesa’s customers just learned the hard way that there’s only one Pegasus.
#3: Private Equity is the New Vertical SaaS for Embedded FinanceCopy anchor linkCopied
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Coast launched a new product:
Private equity investment in the home services and trades sector has accelerated dramatically over the past several years. HVAC, plumbing, electrical, and other field service businesses have become some of the most active acquisition targets in private equity, driven by strong recurring demand, favorable fragmentation, and significant opportunities to modernize operations at scale.
As private equity platforms start standardizing core systems, from CRM and dispatch to purchasing and financial workflows, expense management stands out as one of their biggest opportunities. When done right, it delivers immediate improvements to cash flow, visibility, and operational efficiency across the entire platform.
The challenge? Fuel and materials expenses are a huge portion of costs for platforms, but traditional fuel card programs were built for single-entity businesses and generic expense management solutions were designed for office environments, not businesses with significant field operations. No solution addresses the complexity of managing spend across multiple operating companies.
Today, Coast is introducing a solution built for this exact challenge … Coast for Private Equity gives home services and trades platforms a modern foundation for financial and operational efficiency.
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If you have young kids, you have probably been forced to watch the TV show Peppa Pig. If you aren’t familiar, Peppa is an anthropomorphic pig who lives in the UK with her family. The Peppa Pig universe is populated by a number of other anthropomorphic animals, including Miss Rabbit. Miss Rabbit is notable for having “all the jobs in the world.” Literally, every job. Private businesses. The public sector. All of them are populated with the same polite, highly competent, seemingly omniscient, mildly creepy adult rabbit employee. Are they clones? Robots? Is Miss Rabbit a god, as some Peppa Pig watchers have speculated?
No one knows for sure, but here’s my theory: Miss Rabbit is a metaphor for the private equity industry, a single hyper-efficient entity that operates every essential function in every city in the world, standardizing operations, improving profit margins, smiling politely at customers, and hoping that you don’t notice her god-like power and influence.
Anyway, I don’t think I’ve ever seen a B2B fintech company explicitly target the private equity industry like this, but it makes a lot of sense.
As I have written and podcasted about many times, one of the most challenging aspects of serving small and medium-sized businesses (which desperately need built-for-purpose software infused with financial services) is acquiring them. Smart fintech companies — in payments, lending, and commercial banking — have realized this and pivoted from direct customer acquisition to embedded finance.
And while vertical SaaS companies (Toast, Brightwheel, Housecall Pro, etc.) are an obvious first target for B2B fintech companies running an embedded finance strategy, private equity firms — with their roll-up strategies and shared services models — are a logical next target.
Expect to see more B2B fintech companies take aim at it.
2 READING RECOMMENDATIONS
#1: CFPB Allocates $46 Million To Synapse/Evolve Victims In First-Ever Fintech Bailout (by Jason Mikula, Fintech Business Weekly) 📚Copy anchor linkCopied
An exciting update from BaaS Island from our embedded reporter (who really deserves a break from this beat!) Jason Mikula.
#2: Is Credit Cracking? Credit is NOT Cracking (by Kiah Haslett, Fintech Takes Banking) 📚Copy anchor linkCopied
A two-part series from Kiah on one of the most interesting questions heading into 2026: How worried should we be about the state of banks’ lending portfolios?
Bonus: Risk & Robots: KYB automation with AI* (by Taktile) 💻Copy anchor linkCopied
In this episode, Taktile co-founder and CPTO Maximilian Eber speaks with Cash App’s Yuliya Kazakevich on why understanding the difference between LLMs and agentic systems is critical for risk teams. Hear how Yuliya's team uses agent-level AI to cut KYB case times by ~70% while improving risk decisions. Listen in to hear what pratical, production-ready AI looks like in fintech today.
*this rec is brought to you by one of our fantastic brand partners
1 QUESTION FROM THE FINTECH TAKES NETWORK
There are a TON of interesting questions being asked in the Fintech Takes Network. I’ll share one question, sourced from the Network, each week. However, if you’d like to join the conversation, please apply to join the Fintech Takes Network.
I’ve asked about your predictions for 2026 (thank you for your replies!), and now I want to ask for your resolutions!
In your professional capacity as someone who works in the financial industry, what resolutions do you have for banking and fintech in 2026? What do you want to see happen in our industry next year?
If you have any thoughts on this question, reply to this email or DM me in the Fintech Takes Network!
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
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