 The issuance of a banking charter to digital bank Varo this month could inspire US fintechs to reconsider their strategies, according to Michael Breslin, partner and Fintech Industry Team chair, Kilpatrick Townsend and Stockton LLP.I do think that were going to start seeing more charters issued to entities like Varo and if the Federal Reserve can monitor them properly and they want to accept the testing requirements that the federal government will put on them, that is probably where were going to start seeing things go. Were on the cusp of seeing what is going to be the impact of that, says Breslin.On August 13, the OCC defended its special purpose national bank SPNB charter, also known as the fintech charter, before the Second Circuit, following a challenge by New Yorks Department of Financial Services NYDFS. The appeal follows 2018s Lacewell v. OCC trial, which concluded that the OCC did not have the authority to grant National Bank Act charters to nondepository institutions.One of the reasons youre not seeing a lot of applications for the SPNB charter is because of this cloud of litigation thats over it. Why should companies put all this effort into filling out the application, going through hiring lawyers to put all this stuff together, if we dont even know if this is going to be a valid thing? It could be all for not, says Breslin.According to Jeffrey Naimon, partner, Buckley LLP, Varos decision take on a full purpose charter may signal a shift in the industry.It is unclear whether the issuance of this charter for Varo is going to be the new path, he says.The long timeframe makes it difficult for the fintech charter to be a saviour, but on the other hand the prospect of having one charter is so attractive ... I think well continue to see successful fintech companies look very seriously at either getting a full purpose charter like Varo did, or applying for the fintech charter if they really cant see themselves using the full charter.The ongoing litigation follows a persistent wave of state backlash over regulatory jurisdiction and the changing business of banking. The NYDFSs position is that deposit taking is integral to banking, a tenet that would be changed fundamentally by the fintech charter.Until the litigation concern is wrapped up and addressed one way or the other, its going to be difficult for a fintech to put millions of dollars and management resources into pursuing a charter that its not sure it will ever use, says Naimon.Even then, its going to sign up for a multi-year process of getting a charter its a slow process because bank regulators are very careful in how they vet applicants for a bank charter.Fintechs future in the USIf the current appeal goes on the thwart the fintech charter, Naimon believes the US will become a more hostile environment for fintechs.We have fewer fintechs per capita here than in the UK because we have such a difficult, fragmented regulatory environment, he says, referencing long-standing difficulties between state-level and federal regulators.But some believe the US could still be lucrative.The States continue to be an attractive place for fintechs, says Breslin.I dont think the outcome of this lawsuit will make the States less attractive, I just think its going to either solidify the regulatory landscape in a way that could make it easier for certain types of fintechs to operate the way they want. But at the same time, all of these companies are unique, so some may not care, he says.Despite uncertainty, Breslin points out that OCC continues to take a strong pro-fintech position that breeds encouragement. In May, the regulator announced plans for a special purpose payments charter for payment companies.They announced the payments charter while the fintech charter lawsuit is pending ... even while the case is pending and who knows how its going to come out, the OCC is continuing to try to find alternate ways to make the States a more welcoming, more consistent, unified regulatory landscape for companies that are going to operate across the country, says Breslin.According to Naimon, the US regulatory structure will need to change in order to keep up with tech innovation.The technology is moving and the consumers are moving, so the bank regulatory structure will have to react to that or it will lose out. Its not about the OCC doing this crazy new thing; its that they absolutely need to keep pace because customers arent going to be waiting around, he says. 