The news: Payments company Wise is exploring plans to become a full-fledged bank in the UK, per The Times. This shortly follows its application for a US banking license.

What it seeks to gain: As an electronic money institution, Wise cannot use customer funds for lending and must "ring-fence" or protect them, per The Times. A license would instead allow Wise to:

• Use customer funds as deposits and then lend them out, creating a new source of revenues.
• Directly access the UK's payment infrastructure, eliminating its reliance on third-party banks for clearing and settlement and likely lowering costs and operational complexity.

Why this matters: Fintechs are increasingly applying for US licenses, taking advantage of expedited measures that once took years. The UK is seeing a similar trend: Wise joins fintechs including Starling, Monzo, and Revolut in applying for licenses (some successfully).

Fintechs entering the traditional banking space could pressure incumbents and reshape the competitive landscape. Banking licenses would allow them to offer a more complete suite of services while maintaining their digital-first, customer-centric approach. Established players will need to adapt or risk losing a significant portion of the next generation of banking customers.