The organizers of the de novo NewBank NA believe a wide range of partnerships and a national charter will help them execute their branchless strategy.
NewBank's expected CEO, John McNamara, previously held the executive chairman role with WebBank, which pursues a digital lending strategy that has created partnerships with such companies as LendingClub Corp. and Prosper Marketplace Inc. Similar to WebBank, NewBank also hopes to execute a partnership approach, but the de novo will seek to create a more comprehensive model.
McNamara said WebBank largely partnered with financial technology companies to offer credit, but NewBank wants to gain traction with a number of offerings including credit, deposits and payments. NewBank will look to work with non-depository finance firms and also others such as retailers, original equipment manufacturers and technology businesses.
Across that broad universe of potential partners, NewBank hopes to replicate offerings similar to Goldman Sachs Group Inc.'s partnership to provide Amazon.com Inc. merchants with a credit line and Goldman's partnership with Apple Inc. to provide a credit card.
"There are certainly a whole host of companies that aren't as name worthy and substantial as Apple and Amazon," McNamara said in an interview.
NewBank is currently focused on the regulatory process and has yet to launch its capital-raising efforts. Eventually, the organizers would like to raise more than $100 million.
Organizers are prioritizing the bank's regulatory and compliance capabilities for the fast-changing world of fintech, and they bring experience in handling regulatory uncertainty. Leslie Lieberman, set to serve as executive chairman of the board, helped launch Bond Street Holdings LLC, whose unit Bond Street Bank NA in 2010 became was the first to successfully use the Office of the Comptroller of the Currency's shelf charter to purchase a failed bank. The OCC created the shelf charter in 2008 during the height of the financial crisis to help speed takeovers of troubled banks.
More failed-bank acquisitions followed for Bond Street, which eventually changed its name to FCB Financial Holdings Inc. and sold to Synovus Financial Corp. in 2019 in a deal with a completed transaction value of $1.62 billion.
Other investors successfully used shelf charters to purchase troubled banks but not all exceeded their return expectations. Lieberman said the success that Bond Street and FCB had was partly because of their adherence to regulation.
"When you start a bank, you really need to be prepared to go overboard with regulation," he said in an interview. "Really, really work your tail off, and I believe that paid off for us."
Some banks that eschew a branch model and focus on providing credit to financial technology companies have had success while helping fuel growth in marketplace lending. But the financial technology partnerships have received some scrutiny and faced court battles in recent years. Some litigants have challenged the partnerships, derisively referred to as "rent a charter," arguing fintechs should not be allowed the same legal protections as banks, which can operate across states without securing a license in each state.
The issue is a top priority for the OCC. Acting Comptroller Brian Brooks recently said he wanted to develop a clear test that would determine when a bank is the true lender on the loan and when an arrangement is a "sham" rent-a-bank scheme.
NewBank is pursuing a national OCC charter, which its organizers noted is a different approach than the state charters that many of the digital banks such as WebBank and Cross River Bank that partner with financial technology businesses have. Lieberman said having the OCC as a regulator can benefit the de novo.
"We are excited about being an OCC bank and bringing some of the discipline and regulation that the OCC provides to this industry," he said.
NewBank aims to grow deposits by offering accounts to the clients of its partners, but the de novo also expects to launch an online deposit program while offering consumer and small business loans, McNamara said. Even though NewBank isn't planning to have a branch footprint, it expects to take part in some traditional banking activities such as lending directly to businesses and managing an investment portfolio, Lieberman said.
"We have a business plan that includes some diversification," Lieberman said.