German payment startup is close to launching US bank

• Key insight: Augustus now has the next U.S. regulatory approval it needs to open its AI-powered international clearing bank.
• Expert quote: “Innovation-friendly supervision doesn’t mean risk-free supervision.” —Theodora Lau of Unconventional Ventures
• Forward look: Augustus President Greg Quarles previously said that the bank is aiming to open in Q3 of this year.

Augustus National Bank is now one step closer to opening to the public and becoming a competitor to some U.S. banks, as it has received official approval from the Federal Deposit Insurance Corporation to insure its deposits.

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Augustus announced this week that its FDIC insurance application was approved on July 31. The renamed German payments startup, which got conditional approval for a de novo bank charter in May of this year, is working to build a digital clearing bank with artificial intelligence and stablecoin rail technology.

Augustus is one of a number of fintech companies to apply for a bank charter from U.S. regulators in recent months. It is seeking to provide international enterprise customers with direct access to U.S. dollars and payment rails for clearing transactions instead of partnering with intermediary banks and fintechs. 

The approval comes shortly after Augustus raised $180 million in a Series B fundraise and achieved unicorn status with a $1 billion valuation.

The FDIC approval filing states that the application is approved subject to various conditions, such as initial paid-in capital funds of no less than $73.7 million.

Theodora Lau, founder of fintech consulting firm Unconventional Ventures, told American Banker that the conditions in the approval are typical for the FDIC.

“The minimum initial capital, standard three-year de novo conditions, management and ownership change approvals and one-year window to open are all fairly consistent with what the FDIC typically imposes on de novo national banks,” she said. 

The main unique differentiator in the approval, according to Lau, is a jurisdictional consent requirement for non-U.S. executives at Augustus. The filing stated that proposed bank executives who aren’t U.S. citizens or residents will need to sign paperwork from the FDIC agreeing to being under the regulator’s supervision.

“The specific callout is interesting,” Lau said. “It’s a small but important reminder for a foreign-born entity now operating within a U.S. regulatory perimeter.”

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Augustus CEO Ferdinand Dabitz originally co-founded the bank’s parent company in his native Germany as an instant payments fintech called Ivy, which subsequently rebranded to Augustus upon approval of its U.S. bank charter application. Augustus’ chief technology officer, Simon Wimmer, is also based out of Germany.

“With this approval, we’re one step closer to giving fintechs, banks, businesses and builders around the world direct access to dollar banking infrastructure,” Dabitz said in a statement. “We look forward to continuing to work closely with regulators as we build a world-class American bank that brings secure, trusted dollar access to financial institutions globally.”

Augustus National Bank President Greg Quarles previously told American Banker in May that the bank’s executive team is aiming to open its doors later this year.

“We’re trying to work for a Q3 opening just like Erebor did,” Quarles said at the time. 

Lau said that the FDIC approval shows that regulators are open to new models and are “pricing the novelty in capital, governance control and supervisory oversight instructions.

“Innovation-friendly supervision doesn’t mean risk-free supervision,” she said.