Klarna applies for a US bank charter through the ILC route

why_it_matters

→Owning a bank lowers funding costs and removes dependence on partner banks for lending and deposits.

→ILC charters let non-bank parents own a bank without becoming bank holding companies, which is why fintechs and carmakers use them.

→Consumer lenders with their own charters compete directly with banks for deposits as well as credit.

On 7 July 2026 Klarna applied to the Federal Deposit Insurance Corporation and Utah's Department of Financial Institutions for an industrial loan company (ILC) charter^[1]. The proposed bank would be led by Gary Harding, a former chief executive of Milestone Bank and Prime Alliance Bank. Klarna's chief executive, Sebastian Siemiatkowski, called a banking licence "the natural next step".

Klarna says it has extended $91.3 billion of credit to US consumers since 2019, works with hundreds of thousands of US merchants, and has 119 million active consumers and about a million merchants across 26 countries worldwide.

Why the ILC route

An ILC is a state-chartered bank that a commercial company can own without becoming a bank holding company supervised by the Federal Reserve. That is why carmakers and brokerages have used it, and why fintechs are now queuing for it: Banking Dive notes PayPal and Affirm among the fintechs pursuing ILC charters.

For a consumer lender, a charter changes the economics. It can fund loans with deposits rather than capital markets or partner banks, keep more of the margin and offer deposit products to the customers it already lends to.

What most commentary misses

The coverage frames this as a fintech becoming a bank. The more immediate consequence is for the partner banks that have issued credit on behalf of fintechs. As the largest fintech lenders bring lending in-house, the partner bank model is left with smaller clients and higher risk. Banks in that business need a plan for losing their biggest partners.

What to do

Banks competing in consumer credit should assume the largest fintech lenders will have charters within a few years, and compete on the whole relationship rather than on credit alone. Partner banks should review concentration in their fintech portfolios and price for the likelihood that successful partners leave.

So what, for…

banksPartner banks that issue on behalf of fintechs should expect their largest partners to bring the business in-house. Banks competing in consumer credit face lenders with both a charter and a global app.

fintechsA charter is becoming the expected end state for scaled consumer fintechs; the price is bank-grade capital, governance and examination.

regulatorsThe ILC route concentrates a deposit-taking bank inside a commercial group; supervision of parent-company risk becomes central.

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