Dive Brief:

• Japanese e-commerce company Rakuten is stepping back from its fourth attempt to gain a federal charter, American Banker reported Monday.
• Rakuten, which submitted an application with the National Credit Union Administration on May 15, withdrew that bid Sept. 5, according to the publication.
• The company tried three times to gain a charter via an industrial loan company application, only to withdraw each bid several months later. Rakuten submitted its first ILC bid in July 2019, and withdrew it in March 2020. The company backtracked on successive attempts to gain an ILC charter, withdrawing its second application in July 2020 and its third on May 30 this year.

Dive Insight:

Rakuten has spent the past several years in pursuit of a route that would allow it to establish Rakuten Bank America, through which it could offer its U.S. customers credit cards, personal and business loans and deposits.

It’s standard for firms to withdraw and resubmit applications based on feedback from regulators, although it’s not clear if Rakuten plans to resubmit its NCUA application.

A spokesperson for Rakuten did not immediately respond to Banking Dive’s request for comment.

Rakuten Bank America CEO Lee Carter told Banking Dive in 2020 the firm was fully invested in its pursuit of an ILC charter.

“We intend to follow the process until we’ve exhausted our process with the [Federal Deposit Insurance Corp.],” Carter said. “We feel confident at this point that we know exactly what adjustments they want us to make, and we’re making those adjustments.”

Rakuten’s shift to pursue an NCUA charter may have been, in part, an attempt to avoid some of the controversy ILCs have generated in recent years. 

Commercial firms that own ILCs are not regulated by a federal banking agency. Lawmakers and bank trade groups have pushed back at nonbank firms’ interest in the charters, claiming the structure’s lack of oversight is a consumer safety issue.

The model, they claim, exploits a loophole by allowing companies to offer banking services without oversight by the Federal Reserve.

Rakuten, which runs an online shopping platform with an emphasis on consumer rebates, is part of a category of retail and e-commerce firms that have tried to gain bank charters in an effort to fold financial services into their product offerings. 

“We have a very large customer base already in the United States, and part of our aspirations is to provide banking services to them,” Carter, a former UBS executive, told Banking Dive in 2020.

Retail giant Walmart’s application for its own ILC in 2005 was met with industrywide opposition, resulting in the company withdrawing its application two years later.

An NCUA spokesperson confirmed Rakuten’s application withdrawal to American Banker.