Banking License: Growth Killer or Hidden Advantage?

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Banking licenses can slow fintechs down—but they also open doors. Here's how three European fintechs weighed the trade-offs and what you can learn from their choices.

Getting a banking license as a fintech (credit institution) opens up a world of possibilities for what you can do. But it also comes with a long list of heavy requirements—costs, delays, capital—that can weigh on your business model or even slow you down temporarily. Yet a growing number of players in payments, small business services, and financing are still choosing to go for it. That strategic tension was the focus of an October 8 panel hosted by France FinTech in partnership with Linklaters, as part of French FinTech Weeks. The roundtable, introduced by Guillaume Malaty and moderated by Marc Perrone, both partners at Linklaters, brought together Pierre-Marin Campenon, COO of Younited; Marc Lanvin, deputy CEO of Floa; and Charlotte Gounot, deputy CEO of Defacto. ### Different paths to the same decision At Defacto, the regulatory status question came up in late 2021 after the ACPR asked for clarification on how they operated. The company had to choose between getting its own license or partnering with an established institution. Either way, capital requirements would apply—directly or through equity covenants imposed by lenders. Defacto went for its own financing company license, which took 13 months to process. Younited's choice goes back to 2009. The goal was a more responsible, digital approach to consumer credit, so they applied for a credit institution license. It was granted in 2011, after 24 months. For Floa, the challenge was keeping the license as capital requirements rose. Giving up the banking license would have undermined partner trust, especially as buy now, pay later took off and the European passport became strategic. ### Adapt your status and funding to your growth ambitions Regulatory requirements vary widely depending on whether you want to originate or distribute credit, hold loans on your balance sheet, or sell them off. The choice of status should reflect your business model and stage of development. As Younited pointed out, using a technology solution or partnership can sometimes be a smart alternative to getting your own license. In lending, every new dollar lent ties up capital: to grow, you need to strengthen your capital base to meet prudential ratios. There are several levers to meet funding needs: - Generate capital through profitability - Raise capital regularly - Transfer some risk, especially through securitization The originate-to-distribute model supports growth with less capital. But it comes with costs, operational complexity, and dependence on funding markets—plus persistent obstacles to cross-border securitization. Whether it makes sense depends on your stage and funding strategy. The strength of your shareholders is crucial for a licensed institution because capital requirements apply continuously, and shareholders must be able to inject capital when growth demands it. Floa knows this firsthand: the institution was long owned by two shareholders, one of which ran into trouble, and had to regularly consider capital increases. A shareholder's...