Fintechs have gestured for years that they will disrupt traditional banks with their shiny apps. When asked uncomfortable questions about lacking banking license, finsurgents have brushed off those concerns with the offhand remark that banking license is only a commodity.

Nobody got disrupted except some of those trash-talking fintechs.

Enter COLUMN, the first fintech that acknowledges that banking license is a moat, not commodity. Billing itself as a "developer infrastructure bank", Column is the only nationally chartered bank built to enable developers and builders to create new financial products with the backing of a banking license.

Founded by PLAID's ex-co founder William Hockey and his wife Annie Hockey, the new San Francisco-based fintech acquired Northern California National Bank, a bank based out of Chico, California. It's now in the process of ripping out NCNB's legacy tech and replacing it with a modern core and other applications. It will then sponsor fintechs, who can offer financial products on top of an FDIC-insured bank. (Since it has a banking license, Column is technically a bank but, because of its pedigree, I'll call it a fintech in this post.)

In short, Column is a provider of BaaS (Banking As A Service). Just that it comes to BaaS from fintech rather than the traditional side of banks. Leading bank BaaS providers include:

1. Bancorp Bank and Stride Bank, who power the checking accounts underlying Chime, the largest neobank in USA
2. Starling Bank and ClearBank in UK.
3. RBL Bank and State Bank of Mauritius, who power the BNPL cards of slice and UNI in India.

Also, COLUMN goes beyond Google Plex. The now defunct product from Alphabet Inc. provided a shiny new app and superior branding to random banks but did nothing to upgrade their legacy application landscape. More details in RIP Google Plex – But Big Tech Can Still Disrupt Big Banks.

By acquiring a functioning bank with a banking license, Column obviously respects the power of banking license in open banking and open finance.

By ripping out the existing IT at the acquired bank NCNB, Column also appreciates the constraints posed by legacy tech in partnership between fintechs and banks with legacy tech. You can get a feel for those constraints in the Wall Street Journal article titled Plaid Co-Founder Takes Aim at Rickety Banking Tech:

"...every big fintech company has to rely on bank partners for regulated tasks such as holding customers’ deposits and issuing debit cards. Giants including JPMorgan Chase & Co. and Bank of America Corp. aren’t normally interested in that business (of providing banking services to fintechs). So even the flashiest app makers usually depend on community banks in faraway places to do their financial grunt work. Startups don’t love the current arrangement. Community banks tend to outsource their own technology to old-school software vendors, whose digital offerings are limited and whose fees are often high. Mr. Hockey heard gripes from Plaid customers over the years about the retrograde tech they encountered at the tiny depository institutions that were willing to work with them."

By replacing the legacy tech at NCNB with a modern fintech stack, Column is eliminating these constraints.

If it executes well on its mission, I've no doubt that Column will take Open Banking and Open Finance to new heights.

Of course, there's more to open banking / open finance than just banking license and cutting-edge technology.

Chief among the other success drivers of Column's foray into empowering fintechs are state licensing, capital adequacy, and so on. These regulations will shape the number and nature of fintechs to whom Column can provide banking services, as well as the volumes they can process via Column. Also, as WSJ warns, Column can face the regulator's wrath for the shenanigans of the fintechs it sponsors.

"Column’s business model carries risks. Banks have been fined for the bad behavior at companies they sponsor. In November, the Office of the Comptroller of the Currency said the agency was stepping up its focus on banks that provide services to large fintech companies."

However, as a rare example of a fintech that really gets bank-fintech partnership, I'm quite sure Column will be able to surmount these hurdles as it goes along by leveraging regulatory gap or otherwise.

Not since Square (now Block) am I so excited about a fintech as COLUMN. I will be rooting for it.