Key facts
- Wise and Bunq had their US banking license applications rejected by the Office of the Comptroller of Currency (OCC).
- Wise's rejection cited concerns with anti-money laundering controls, while Bunq was asked for a more US-specific plan.
- Zilch has reduced its US operations, and Monzo is ceasing all US operations.
- Britain's four largest banks reported a combined profit of £29.2 billion in the first half of the year.
- £13.7 billion of these profits were returned to shareholders through dividends and buybacks.
- Analysts suggest banks may be overearning due to current high interest rates and favorable market conditions.
European fintech companies are facing significant challenges in their pursuit of US banking licenses, casting doubt on their expansion strategies. In a recent two-week period, both Wise and Bunq had their applications blocked by the Office of the Comptroller of Currency (OCC). Wise's bid was rejected due to concerns over anti-money laundering controls, while Bunq was asked to present a plan more specifically tailored to the US market. The OCC also questioned Bunq's boss's plan to manage the US arm on a part-time basis. Both firms have stated their intention to re-apply.
These rejections challenge the prevailing narrative that the US banking sector is ripe for deregulation and easy entry for European fintechs. Industry observers note that navigating the US's dual banking system, which involves federal and state-level regulations, is a complex and lengthy process. Other fintechs have also encountered difficulties; Revolut abandoned its US plans in 2023 after years of regulatory friction, and Monzo withdrew its application in 2021 and is now ceasing US operations entirely. Zilch has also scaled back its US presence.
Meanwhile, the UK's major banks have reported substantial profits. Natwest, HSBC, Lloyds, and Barclays collectively earned £29.2 billion in the first six months of the year, with £13.7 billion distributed to shareholders. Analysts like Gary Greenwood from Shore Capital suggest that banks might be currently 'overearning' due to high interest rates and favorable market conditions, raising questions about whether these returns represent a new normal or the peak of the cycle. The Bank of England's current interest rate of 3.75% is not expected to decrease until late 2027, contributing to these elevated bank profits.