Fintech remains at the forefront of the agenda of many financial services companies, investors, and regulators. The potential to transform how financial services are delivered and to improve underlying processes like payments, platforms, investor opportunities and more, has made fintech one of the most heavily discussed topics in recent years. Balancing the potential for financial innovation with the need to make compliance sense of these new models is the challenge that is front and center in a new publication from the Federal Reserve Bank of Philadelphia. Also, in the closing days of the Obama administration the National Economic Council released a statement of principles as a policy framework for the fintech ecosystem. We take a look at both below.
Consumer Compliance Outlook: Fintech
A collection of articles and features on fintech was released by the Philly Fed's Consumer Compliance Outlook in January 2017. Here's a rundown of some of the major pieces:
- Perspectives on Fintech: A Conversation with Governor Lael Brainard – Brainard shares her take on recent developments in fintech and how regulators and bankers should approach financial innovation.
- Fintech: Balancing the Promise and Risks of Innovation – This article discusses how the Fed is analyzing fintech innovations and their impacts in different areas, including supervision, community development, financial stability, and payments, and why bankers and supervisors should care about fintech. This piece by Teresa Curran, former EVP and Director of Financial Institution Supervision and Credit at the San Francisco Fed, provides a Silicon Valley-influenced perspective on how regulators can "ensure that consumers are protected and that the safety and soundness of banks is maintained."
- FinTech for the Consumer Market: An Overview – This article provides an overview of four fintech market segments: credit; digital payments; savings, investments, and personal financial management (PFM); and distributed ledger technology. In addition, this article surveys fintech's underlying data and technology ecosystem. Author Tim Marder, FinTech Senior Supervisory Analyst at the San Francisco Fed, includes process diagrams and charts to illustrate how fintech works, including a generic depiction of the alternative lender loan origination process.
- Laws, Regulations, and Supervisory Guidance – A table of certain federal laws and implementing regulations for financial services and products that may be relevant to fintech firms and their depository partners is provided, which includes a high-level description and citations.
These articles and more are available at Consumer Compliance Outlook.
The white paper A Framework for FinTech was released by the White House on January 13, 2017. As explained in a blog post on the White House website:
This document sets forth Administration policy objectives that reflect widely-shared values and practical expectations for the financial services sector and the U.S. government entities that interact with the sector. It then provides ten overarching principles that constitute a framework policymakers and regulators can use to think about, engage with, and assess the fintech ecosystem in order to meet these policy objectives.
The ten principles for stakeholders are to:
- think broadly about the financial ecosystem;
- start with the consumer in mind;
- promote safe financial inclusion and financial health;
- recognize and overcome potential technological bias;
- maximize transparency;
- strive for interoperability and harmonize technical standards;
- build in cybersecurity, data security, and privacy protections from the start;
- increase efficiency and effectiveness in financial infrastructure;
- protect financial stability; and
- continue and strengthen cross-sector engagement.
The whitepaper is an outgrowth of the White House FinTech Summit held in June 2016, where then Cabinet Secretaries and senior officials from across the Administration and independent regulators engaged with stakeholders about the potential for fintech to further myriad policy goals, including small business access to capital, financial inclusion and health, domestic growth, and international development. Since the Summit, government agencies have held a number of events and made several announcements related to fintech, e.g., the Federal Trade Commission's FinTech Series, the Office of the Comptroller of the Currency's Fintech Charter, the Consumer Financial Protection Bureau's Project Catalyst, and more. But, the blog post accompanying the whitepaper cautions that there is still significant work to be done and that "the United States should continue developing a policy strategy that helps advance fintech and the broader financial services sector, achieve policy objectives where financial services play an integral role, and maintain a robust competitive advantage in the technology and financial services sectors to promote broad-based economic growth at home and abroad."
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Below are links to several fintech-related articles by Venable attorneys:
- OCC Moving Forward with Special Purpose Bank Charters for Fintech Companies
- The Future of Online Advertising and Marketing for Consumer and Business Lending
- FTC FinTech Forum Part II – Crowdfunding and P2P Payments
- "True Lender" Troubles – More Uncertainty for Partner Origination Models
- There Is No On-Ramp – Lessons for FinTech from the CFPB
- Is the Future of Fintech a Bank Charter?
- Understanding the Evolving Legal and Regulatory Landscape for Consumer Marketplace Lending
For more information, please contact Jonathan L. Pompan at 202.344.4383 or jlpompan@Venable.com.
Jonathan L. Pompan, Partner and co-chair of Venable's CFPB Consumer Financial Services practice advises on compliance matters, and represents clients in investigations and enforcement actions brought by the CFPB, FTC, state attorneys general, and regulatory agencies.
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This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can be provided only in response to a specific fact situation.