A pair of US banking application rejections has called into question the widely held assumption among European fintechs that securing a foothold on Wall Street is an achievable near-term goal. In his weekly column, Samuel Norman examines the expansion roadmap for Europe's leading fintechs and the growing debate surrounding the exceptional profits reported in UK banks' half-year results.

OCC Blocks Wise and Bunq Charter Bids

Denied, denied, withdrawn — that is the recent track record for Europe's most prominent fintech companies pursuing a US banking charter.

Within a span of two weeks, the Office of the Comptroller of the Currency (OCC), the US watchdog responsible for approving national banking permits, blocked bids from both Wise and Bunq.

Wise, the UK-listed fintech that transferred its primary listing to the US last year, was rejected on the grounds of "significant supervisory and compliance concerns" related to its anti-money laundering controls. The company has operated in the US since 2015 under a money transmitter licence.

Bunq, meanwhile, was instructed to produce a plan "specifically built for the US market." The OCC also reportedly took a dim view of chief executive Ali Niknam's intention to manage the US arm on a part-time basis. Both firms have stated they intend to re-apply.

A national bank charter would allow these firms to accept deposits and lend across all 50 states under a single federal framework, rather than patching together state-level licences with varying capital, compliance, and consumer protection requirements. That unified access to the US deposit base — the largest in the world — is what makes the charter so strategically valuable, and why repeated rejections carry weight beyond individual companies.

The back-to-back rejections have prompted fresh scrutiny of the expansion playbook that many of Europe's fastest-growing firms have followed. The outcomes also undercut the notion that the US banking sector represents a landscape of deregulation simply awaiting European entrants.

One City lawyer noted this week that they would need to stress to fintech clients that a US IPO is not the be-all and end-all, particularly for firms still in the mid-cap range.

Zilch Curtails US Operations

Some fintechs appear to be recalibrating their American ambitions. A deep dive on Zilch revealed that the payments firm's founder had initially hoped to expand across the Atlantic but quickly re-evaluated after conversations with Monzo chief executive TS Anil, who advised that focusing closer to home was the more prudent path.

Zilch confirmed in its 2024 accounts that it had "curtailed" its US operations. The company had previously rolled out its buy now, pay later offering to a waitlist of over 150,000 Americans in 2022.

Reform-Fueled Interest Meets Regulatory Reality

Interest in securing a US banking permit remains, driven in part by the Trump administration's pro-banking reforms. The changes have raised the threshold at which firms face tougher prudential standards and eased restrictions on speculative assessments.

In a brief window, PayPal, Nubank, Coinbase, Revolut, and Bunq all registered interest in obtaining a US charter.

However, entering the US market — and building sufficient local scale to satisfy investors — is proving to be a grueling regulatory marathon. The US operates a dual banking system split between federal regulators and individual states. Without a national charter, firms must navigate 50 separate state licensing and compliance regimes.

Revolut abandoned its initial US plans in 2023 after years of friction with California's state regulator. When the company made a second attempt, it applied at the national level.

Monzo withdrew its application for a US banking permit in October 2021 and has since ceased all operations in the region. The combined effect is that not a single major European neobank has yet secured a US national charter, despite nearly a decade of attempts by the continent's most well-capitalised challengers.

UK Bank Investors Warned Against Complacency

Britain's big four banks — NatWest, HSBC, Lloyds, and Barclays — reported £29.2 billion in profit for the first six months of the year. Nearly half of that amount, £13.7 billion, has been returned to shareholders through dividends and share buybacks so far this year.

Gary Greenwood, equity analyst at Shore Capital, said there is growing concern that investors and some management teams "are becoming too comfortable extrapolating current conditions indefinitely."

"It is difficult to look at numbers such as these and conclude that banks are not currently overearning," he added.

Higher interest rates, structural hedge tailwinds, and tight credit conditions have all contributed to boosting the sector's return on tangible equity (RoTE), which measures a company's income as a percentage of its equity. Shore Capital estimates Lloyds' retail unit RoTE at 32 per cent for the first half, while NatWest's stands at 27 per cent. For comparison, UK banks' average RoTE sat closer to mid-single digits during the low-rate years before 2022.

"The critical question for investors is whether these returns represent a new normal or the peak of the cycle," Greenwood said.

Some of the profit momentum stems from banks upgrading their income forecasts on the back of an elevated interest rate trajectory. Lloyds does not expect the Bank of England to reduce rates from 3.75 per cent until late 2027. The sharp shift in monetary direction followed the Iran war, which sent oil prices soaring and reignited inflationary pressure worldwide.

Left-wing MPs and lobbying groups are seizing on this rationale to justify demands for a fresh tax on the banking sector.

"Investors risk mistaking cyclical tailwinds for structural change," Greenwood concluded.