The fintech lending space is growing more competitive, with SoFi Technologies (NASDAQ: SOFI), Upstart (NASDAQ: UPST), and Affirm (NASDAQ: AFRM) all vying for the same pool of borrowers.

The key structural difference between these three companies is how they fund their loans, and that distinction is becoming increasingly important to investors.

SoFi secured its bank charter in 2022, making it one of the earliest fintechs to achieve that milestone, giving it a significant operational advantage over its rivals.

Holding a bank charter allows SoFi to take customer deposits, which provides a cheaper and more stable source of funding for the loans it originates.

That funding advantage has contributed to a dramatic financial turnaround at SoFi, which went from a net loss of $110 million, or -$0.14 per share, four years ago to net income of $156 million, or $0.12 per share, in Q2 2026.

Upstart received conditional approval for its own bank charter in July, with final approval now expected sometime in early 2027, a development that could reshape how the AI-driven lending platform operates.

Buy now, pay later giant Affirm applied for an industrial loan bank charter in January, though the company has not yet received any regulatory approvals on that application.

The broader trend of fintechs pursuing bank charters reflects a maturation of the sector, as companies look to reduce their reliance on more expensive wholesale and capital markets funding.

If Upstart and Affirm ultimately secure their charters, analysts and investors expect the transition to deposit-based funding to be just as transformative for those firms as it proved to be for SoFi.

The charter race among these three lenders is one of the most consequential regulatory storylines in fintech right now, and the outcomes will likely define competitive positioning in consumer lending for years to come.

Investors tracking the sector should watch for updates on Upstart’s path to final charter approval and any regulatory movement on Affirm’s pending application, as both could serve as significant catalysts.