Not sure where Joef is coming from. Insured deposits are most certainly cheap. And a Fintech charter isn't likely to be funded by a branch network. FDIC insurance fees are minimal and for well rated institutes, they can pay nothing. And there is no requirement for a bank to be highly levered or blow up.
How will you get ROE banks dream of without leverage? Leverage is what makes many of these products attractive.
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Insured deposits are cheap, attracting them is not. The current problem with small banks is that their cost of funds is too high. Currently the true marginal cost of funds for small banks is probably at least 2% over the fed funds rate.
The primary reason for the high cost of funds is the requirement for funding to be a percentage of the ‘retail deposits’. This causes all the banks to compete for these types of deposits. While, operationally, loans create deposits and there are always exactly enough deposits to fund all loans, there are some leakages. These leakages include cash in circulation, the fact that some banks, particularly large money center banks, have excess retail deposits, and a few other ‘operating factors.’ This causes small banks to bid up the price of retail deposits in the broker CD markets and raise the cost of funds for all of them, with any bank considered even remotely ‘weak’ paying even higher rates, even though its deposits are fully FDIC insured.
Additionally, small banks are driven to open expensive branches that can add over 1% to a bank’s true marginal cost of funds, to attempt to attract retail deposits. So by driving small banks to compete for a relatively difficult to access source of funding, the regulators have effectively raised their cost of funds.
If p2p platforms became chartered insured institutions, they would face the same challenge as small banks.
Regarding ROE, p2p lenders are leveraged more than any regulated institution could be. 100% of their loans are funded by debt. That debt is perfectly duration matched and won't(can't) run (though it can stop investing in future loans, which is liquidity risk). A bank needs equity to grow their loan book. P2p lenders can grow their "balance sheets" all they want. They are not banks. So they're not subject to banking regulation, which, paradoxically, means that it can do a core function of banking much more efficiently than an actual bank can. Hence the need, IMO, for a more modern regulatory framework and charter.