New research from the University of Utah Fintech Center shows industrial banks outperform traditional banks in safety, returns, and lending to underserved markets, challenging calls for expanded FDIC regulation.
Why Utah’s Industrial Banks Are Driving Fintech Innovation — and Outperforming Traditional Lenders
Salt Lake City, Utah — December 9, 2025
The FDIC is once again taking a hard look at industrial banks. After withdrawing a 2024 proposal that would have expanded federal oversight of their parent companies, the agency has launched a broader Request for Information — signaling that further regulatory changes remain on the table.
But new research backed by the University of Utah’s Fintech Center argues that additional restrictions aren’t just unnecessary — they could actively harm competition, innovation, and access to credit.
Industrial banks (or industrial loan companies) occupy a unique corner of the financial system. They can be owned by non-bank companies, operate with far fewer branches, and often serve customers tied to the parent company’s business. This flexibility has made them an important backbone for fintech and other tech-enabled financial services — especially in Utah, where the sector is concentrated.
A new study, “Reassessing the Strength of Industrial Banks: Evidence, Trends, and Policy Implications,” led by Nathan Seegert, PhD, (University of Utah Fintech Research Fellow and Finance Professor at Northeastern University), finds that the model is not only working, but outperforming traditional banks by nearly every major metric. Co-authors Hanjun Kim and Chenhui Ling (David Eccles School of Business) draw on two decades of FDIC and Compustat data, regulatory filings, and historical analysis.
Their findings cut directly against the narrative that IBs pose outsized risk.
Key Findings
According to the researchers, industrial banks:
The study also confirms that IBs operate under the same prudential and compliance standards as other FDIC-insured institutions. They are jointly overseen by the FDIC and state regulators (including Utah’s Department of Financial Institutions), and parent companies are bound by Capital and Liquidity Maintenance Agreements (CALMA) and Parent Company Agreements (PCA). These rules require parents to support the bank financially while keeping operations structurally separate.
A Model the Data Supports
“This research offers rigorous, data-driven evidence that industrial banks operate safely and effectively within the U.S. financial system,” said Ryan Christiansen, Executive Director of the University of Utah Fintech Research Center. “These findings validate what Utah’s banking community has long demonstrated: that industrial banks combine innovation with strong regulation, providing a model for how fintech and traditional finance can coexist responsibly.”
Some policymakers have pushed for tighter limits on commercial ownership or more federal control. The data doesn’t back them up.
“We find little evidence that restrictions on commercial ownership would deliver stability benefits, but that they could increase compliance and innovation costs,” the authors conclude.
A companion position paper from the Fintech Center goes further, arguing that industrial banks are “a proven model that enhances competition, serves underserved markets, and maintains exceptional safety standards.” The real question, the Center says, is not whether to restrict the model — but what regulators can learn from its success.
By the Numbers
Over the past quarter-century, the U.S. banking landscape has consolidated dramatically:
How IB Lending Differs
Industrial banks’ lending mix stands out sharply:
| Loan Category | All FDIC Institutions | Commercially-Owned IBs |
|---|---|---|
| Commercial & industrial | 12% | 22% |
| Consumer | 5% | 62% |
| Real estate | 75% | 11% |
| Other | 8% | 5% |
That tilt toward consumer and small-business borrowers is one reason IBs have become essential partners in fintech — from payments and credit platforms to embedded finance.
What’s Next
The FDIC’s Request for Information, shown below, signals a renewed push to reassess the IB model. The University of Utah’s Fintech Center research presents a data-driven counterbalance: IBs are stable, well-regulated, and fill credit gaps that other banks no longer prioritize. As policymakers debate the future of the sector, the question isn’t whether industrial banks can operate safely — the evidence shows they already do — but whether regulation will evolve in a way that preserves their role in innovation and competition.
Learn more:
The University of Utah Fintech Center connects students, researchers, and industry to drive innovation in financial technology. Through hands-on, industry-led labs, students tackle real-world fintech challenges — from cryptocurrency and cybersecurity to regulatory technology — using design thinking and collaborative problem-solving with community partners.
The Center also hosts fintechXstudio, a startup incubator and early-stage accelerator supporting Utah students and recent alumni in scaling fintech ventures, providing mentorship, workspace, funding, and business resources. These programs are designed to evolve with emerging trends, helping cultivate the next generation of fintech leaders and strengthening the state’s broader fintech ecosystem.