Fintech startups that hated banks are now becoming them

Once scornful of banks, fintech startups are now embracing the banking industry themselves. SoFi, a pioneer in this movement, has transformed into the 46th largest bank in America. Klarna, PayPal, and Chime have followed suit, with Chime announcing a recent bank acquisition. Revolut, a company once vocal about its dislike for banks, has also applied for a banking license.

Block, which obtained a limited banking license in 2021, is eyeing additional licenses as well. The shift towards becoming banks is driven by the lucrative opportunities in lending, especially as the tech-savvy customers they initially attracted pursue homeownership. Controlling their own funding sources is crucial, as seen with LendingClub's purchase of a bank in 2020 to become Happen.

These companies recognize the risks associated with rapid growth, as regulators tend to penalize banks for expanding too quickly. Robinhood's aborted pursuit of a banking license in 2019 serves as a reminder of this. Chime's recent acquisition of Stride has boosted its shares, but they have since experienced a nearly 10% decline.