25 Industrial Banks Shaking Up Finance
Industrial banks, or industrial loan companies (ILCs), aren’t your average banks. They’re a nimble force in the U.S. financial world, targeting niche markets with tailored products that traditional giants like JPMorgan Chase often overlook. As of December 31, 2024, these 25 ILCs assets range from UBS Bank USA’s $114.3 billion to Minnesota First Credit & Savings’ $25 million.
What Drives Industrial Banks?
ILCs are state-chartered, FDIC-insured, and uniquely owned by non-financial firms—think retailers, manufacturers, or tech giants like Square (now Block, Inc.). Unlike banks shackled by the Bank Holding Company Act, they can sidestep some federal rules, letting companies like Toyota offer banking directly to their customers. Their core mission? Deliver specialized lending and services, filling gaps whether it’s student loans (Sallie Mae Bank) or merchant financing (Square Financial Services). For consumers, this means easier access to niche products like auto loans from BMW Bank or health savings from Optum Bank. For traditional bankers and fintech players, it’s a masterclass in blending banking with business innovation, reshaping competition and risk.
 | ILC Banks Balboa Thrift and Loan & Community Commerce Bank may not strictly be classified as industrial banks and could be thrift institutions or other state-chartered banks. | Location | Assets |
 | UBS Bank USA offers wealth management and lending for high-net-worth clients and businesses, ensuring financial success with global expertise. | Salt Lake City, UT | $119.1B |
 | Sallie Mae Bank provides student loans and savings solutions, empowering students and families to achieve educational and financial goals. | Salt Lake City, UT | $30B |
 | Optum Bank, Inc. delivers health savings accounts and banking for healthcare, serving consumers and providers with tailored, innovative solutions. | Salt Lake City, UT | $18.6B |
 | Beal Bank USA specializes in commercial real estate and distressed assets, delivering innovative financing for savvy investors and institutions. | Plano, TX | $16.2B |
 | Comenity Capital Bank powers retail credit cards and financing, helping shoppers access exclusive deals and rewards at top brands. | Draper, UT | $13.2B |
 | BMW Bank of North America finances BMW vehicles with competitive loans and leases, appealing to car enthusiasts and dealers seeking premium service. | Salt Lake City, UT | $12.2B |
 | WEX Bank leads in fleet and travel card services, offering businesses efficient payment solutions and cost-saving tools. | Midvale, UT | $7.2B |
 | Toyota Financial Savings Bank offers auto financing for Toyota buyers, delivering seamless loans and leases to drivers and dealerships nationwide. | Henderson, NV | $7.2B |
 | Merrick Bank extends credit cards and loans to those with limited credit, providing opportunities for subprime consumers to build financial health. | South Jordan, UT | $6.7B |
 | Celtic Bank supports small businesses with loans and financing, helping entrepreneurs and startups thrive with flexible capital. | Salt Lake City, UT | $3.7B |
 | WebBank partners with FinTechs for online lending, offering innovative credit solutions to digital-first consumers and businesses. | Salt Lake City, UT | $2.1B |
 | Medallion Bank focuses on RV and boat loans, providing financing for leisure vehicle buyers seeking adventure and freedom. | Salt Lake City, UT | $2.5B |
 | Nelnet Bank specializes in student loan servicing, offering financial tools for borrowers to manage education debt effectively. | Draper, UT | $1.4B |
 | Pacific Coast Bankers’ Bank supports other banks with correspondent services, offering strategic solutions for financial institutions seeking partnerships. | San Francisco, CA | $1.3B |
 | Square Financial Services backs Square merchants with banking and loans, empowering small businesses to grow through seamless financial support. | Salt Lake City, UT | $931M |
 | Pitney Bowes Bank, Inc. provides equipment financing for Pitney Bowes clients, ensuring businesses optimize operations with reliable funding. | Salt Lake City, UT | $852M |
 | Eagle Mark Savings Bank finances Harley-Davidson and other vehicles, attracting motorcycle enthusiasts with tailored lending solutions. | Carson City, NV | $722M |
 | Finance Factors, Ltd serves Hawaii with business and consumer loans, fostering local growth and financial stability for communities. | Honolulu, HI | $700M |
 | First Electronic Bank offers online banking and lending, appealing to tech-savvy consumers and businesses seeking digital innovation. | Salt Lake City, UT | $456M |
 | Balboa Thrift and Loan may offer consumer loans, but its thrift status suggests a different focus—explore for potential financial services. | Chula Vista, CA | $422M |
 | Community Commerce Bank serves small businesses and locals with banking, possibly a thrift—check for unique community-focused offerings. | Claremont, CA | $400M |
 | Milestone Bank focuses on commercial real estate and small business loans, supporting local economies with strategic capital. | Park City, UT | $366M |
 | Continental Bank delivers equipment financing and fintech partnerships, helping businesses innovate and grow with flexible solutions. | Salt Lake City, UT | $191M |
 | Hatch Bank supports Fintechs and startups with banking services, fostering innovation for companies pushing financial boundaries. | San Marcos, CA | $117M |
 | Minnesota First Credit & Savings provides savings and credit to local consumers and businesses, ensuring accessible financial tools for communities. | Minnetonka, MN | $26M |
The Edge and Niche of ILCs
ILCs shine by mastering targeted lending models, making them agile and efficient in niches like education, autos, or fintech. Take WebBank—it partners with Upstart and Affirm to power online loans, giving consumers fast credit access. Or Comenity Capital Bank, rolling out retail credit cards for brand-loyal shoppers. Consumers get solutions that fit, while traditional bankers and fintech players see a model where parent companies like UBS Bank USA ($114.3B in assets) leverage global expertise for high-net-worth clients. Their flexibility—no Bank Holding Company Act ties—lets them innovate fast, teaming with fintechs or embedding finance in apps. But their small footprint—no vast branches like Wells Fargo—limits scale unless they’re also willing to double down on digital deposit innovation.
Strengths:
- Niche Mastery: ILCs dominate specific loans, like Merrick Bank’s credit cards for thin-file consumers or WEX Bank’s fleet cards for businesses, staying lean and effective.
- Agility: Free from some regs, they pivot fast, launching digital models or non-traditional ties.
- Synergy: As subsidiaries (e.g., Toyota Financial Savings Bank), they seamlessly serve parent customers, boosting loyalty.
Weaknesses:
- Reg Watch: State and FDIC oversight is a maze, especially for smaller ILCs, with regulators eyeing funding quality like brokered deposits.
- Small Footprint: No big branch networks mean limited reach compared to traditional banks.
- Niche Risks: Heavy focus on one sector—like autos—makes them vulnerable if that market dips.
Opportunities and Pitfalls
ILCs can surge ahead with fintech partnerships and tech upgrades like mobile apps or blockchain. But challenges hit hard: economic slumps in their industries (say, autos for BMW Bank), tech rivals outpacing them, and compliance burdens. Regulators are also skeptical of their funding—many rely on brokered deposits and non-standard options, raising red flags about quality and stability. While only a few ILCs have failed outright since their start in the early 1900s, the scrutiny is fierce, pushing them to prove they’re not just niche players but safe ones.
The Public Policy Tightrope
ILCs aren’t just financial tools—they’re political lightning rods. Proposals to kill or curb them pop up regularly, with debates over mixing banking and commerce. The FDIC once slammed the brakes, imposing a moratorium on new ILC charters for years over systemic risk fears from too-big-to-fail owners and oversight gaps. That changed in 2020 when they reopened applications—Square (now Block, Inc.) and Nelnet were among the first approved, signaling a thaw. But recent scrutiny lingers: regulators worry about transparency, fintech-bank ties, and whether corporate owners could destabilize the system. For traditional bankers and fintech players, this means watching Fed, FDIC, or Congress moves closely—reforms could shrink or expand the ILC model fast.
The Utah Factor
Most ILCs cluster in Utah—think Salt Lake City hubs like UBS, Sallie Mae, and WebBank. Why? Utah’s regs are friendlier, attracting non-financial parents seeking banking arms. This concentration supercharges their niche power but also spooks regulators, who fear over-reliance on one state’s rules could mask risks. For consumers and traditional bankers and fintech players, it’s a signal to track how Utah’s ILC boom influences national policy—and whether regulators will tighten the leash.
Future Outlook: Seize the ILC Advantage
The fintech ecosystem is hungry for bank charters, and ILCs could be the answer, letting players offer loans and FDIC-insured deposits without full bank status. Larger neobanks like Chime or Brex, stung by tougher rules on bank-fintech partnerships post-Synapse, may pursue ILCs to control their own deposits and lending, bypassing costly intermediaries if they master compliance and digital deposits. Building an ILC isn’t easy—it demands hefty capital, expert management, and robust tech for compliance, taking years to launch, no matter the policy climate.
Digital banking and embedded finance are next—corporations might use ILCs to weave financial services into apps, like Square does for merchants. But policy hangs in the balance. Regulatory shifts from the Fed, FDIC, or Congress could either constrain ILC growth or unlock new opportunities. Traditional bankers and fintech players, get ready: partner with ILCs, innovate your own models, or risk being left behind. Consumers, explore their niche offerings—but stay sharp on their funding and regulatory risks.
