Affirm has filed to become an Industrial Loan Company (ILC), a move reflecting a broader trend among Buy Now Pay Later (BNPL) firms. This structure allows companies to accept FDIC-insured deposits without their parent companies facing Federal Reserve oversight. Currently, Affirm pays around 7% to fund its loans, while SoFi, which has a bank charter, pays only 4-5%. The difference in funding costs is significant; SoFi saves about $550 million annually, showcasing how essential these lower rates can be for profitability. The timing of Affirm’s application aligns with recent FDIC approvals for Ford and GM, indicating a favorable regulatory environment for ILCs. Other companies, like PayPal and Nissan, are also pursuing similar paths. The shift to banking infrastructure is strategic. By becoming their own banks, firms like Affirm can lower costs, recapture fees paid to partner banks, and offer products they can't develop through partnerships. Square, for example, has successfully leveraged its bank charter to grow its consumer loan origination to $9 billion. As fintech companies transition to banking, they access cheaper funding, which gives them a competitive edge. This move isn't just about capital markets; it’s also about governance and operational efficiency. Relying on partner banks can create structural risks, such as slower controls and fragmented accountability. Owning the banking rail mitigates these issues, making the case for a bank charter stronger despite the regulatory hurdles involved.