Tuesday Topic: A New ILC Threat

Barb, it seems as though it's just a matter of time before these ILC charters gain traction and then the gates open for more. Meanwhile, these non-banks are chipping away at our bank's payment revenue without a charter. I saw an report from Accenture "5 Big Bets in Retail Payments in North America" that suggests 15% of payments revenue will be taken by new Fintech firms away from banks in the next three years. As a small community financial institution there isn't much we can do to change that but it reinforces the fact that we better make improvements wherever we can in order to offset these impacts.

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John Tyson
CFO/SVP
Altamaha Bank & Trust Company
Vidalia GA
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Original Message:
Sent: 10-29-2019 09:03
From: Barb Rehm
Subject: Tuesday Topic: A New ILC Threat

Remember the battle over Walmart trying to charter an industrial loan company? Banking won that one more than a decade ago, but the fight is back and this time it's over a Japanese company called Rakuten, according to American Banker. Rakuten wants to use its ILC to offer banking services to U.S. customers of its online rebates platform. Rakuten's application is drawing more industry opposition than other applications - like one from Square - because, like Walmart, it is not a financial company. "An FDIC-backed financial institution affiliated with an online retail giant echoes the concerns the industry had about Walmart's bid in the early 2000s," the newspaper reported. "They now see Rakuten's application as attempting to breach the traditional separation of banking and commerce." Of course, for this threat to become real, the FDIC will have to grant Rakuten an ILC charter. I don't know what the FDIC will do, but when I heard Chair Jelena McWilliams speak on Oct. 16 she said the FDIC will rule on these ILC applications because federal law requires it. So the freeze on ILC charters may be coming to an end.

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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network, LLC
Arlington VA
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