WASHINGTON, D.C. — Fintechs are having trouble facing reality when it comes to obtaining bank charters, FDIC Chairman Jelena McWilliams and Comptroller of the Currency Joseph Otting said here at the FDIC’s Fintech and the Future of Banking conference on Wednesday.

Both regulators said proving the necessary capital and profitability have been particularly difficult for fintechs who still think they have the stomach to apply after learning about all the regulations involved.

“Often, fintechs left skid marks as they were leaving the building,” Otting said, describing his agency’s efforts to educate roughly 250 fintechs on what it takes to become a bank. He said about 200 fintechs ultimately decided they were content just partnering with banks. Fintechs, he explained, are “good at disruption. They’re good about bringing solutions to the market and solving consumers’ particular challenges with the U.S. banking system.”

Otting said the OCC is still “excited” about the special-purpose charter for fintechs that it rolled out last year. “We think it offers up many opportunities for people to be able to come in and become a national bank,” he said, adding that small-ticket consumer lending firms and entities that offer custody banking services through distributed-ledger technology have been particularly interested.

Otting also said he believes the role of the agency is to approach fintechs with an open mind. “It is the wave of the future,” he added. “I can’t even envision what banking will be like in the future, but it will be different from what it is today, I’m sure of that.”

Investment app Robinhood recently became the second fintech to apply for a full-service national bank charter. Mobile-only banking fintech Varo Money also has an application sitting with the OCC that has conditional approval, but this is pending FDIC approval for deposit insurance required for the charter. It’s worth noting that both firms opted to pursue the full bank charter rather than the special-purpose charter.

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On whether there would be any wiggle-room for fintechs seeking charters, McWilliams said the bottom line is that the FDIC has statutory and regulatory requirements it has to meet, whether it’s a bank applying for deposit insurance or an industrial loan company (ILC) applying for deposit insurance. She said the agency needs to focus on “safety and soundness” of any institution applying for deposit insurance.

“We have a regulatory requirement that at the end of year three; you’re supposed to have 8% capital at your entity,” McWilliams said, adding that some fintechs have translated that 8% capital to mean equity. “Capital doesn’t equal equity,” she continued. “And working through the capital adequacy issues for fintechs has been rather interesting and cumbersome in some cases.”

On profitability, she said the issue is whether fintechs can prove profitability to the extent that would give regulators “peace of mind, as they’re applying for an ILC charter and getting deposit insurance, that we’re not introducing risk to the system.”

McWilliams said the FDIC is making an effort to be more transparent and make the application process “more consultative.” She said the agency, for instance, has already started a preliminary filing process through which regulators can answer questions from fintechs and de novo banks on how the applications should be structured and what information is needed to make them “substantially complete.”

“The truth of the matter is that capital adequacy and profitability are requirements we need to be very focused on,” McWilliams said. “We’ll proceed with the ILC applications as they come in, and we have a statutory mandate to do so, but they have to satisfy the requirements we have on both the statutory and regulatory side.”

But what exactly is the appetite among fintechs for a charter and the bureaucracy and that comes with it?

Daniel Farris, a partner at law firm K&L Gates, whose clients include traditional FIs and fintechs, recently told Bank Innovation that, while some fintechs are looking at the securities laws and banking license requirements and actually want to fill that space, most see the “bigger opportunity” in the industry as being a provider of technology services to traditional banks and other established entities.

“I don’t know that I’d say they’re disinterested,” he added, “but I’d say they’re pretty apathetic about it”.