The Office of Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was created by the National Currency Act of 1863 (154 years ago, 20 years before the automobile was invented by Karl Benz from Germany). The OCC was established by President Abraham Lincoln to help fund the American Civil War and later transformed into a regulatory body that supervises about 2,000 national banks and federal savings associations.
The OCC’s mission is simple: To ensure the safety and soundness of the national banking system, to foster competition by allowing banks to offer new products and services, and to ensure fair and equal access to financial services to all Americans.
Let’ fast forward to 2017.
In late 2016, the OCC announced that a special purpose charter for financial technology (Fintech) companies to become special purpose national banks.
For those of us that work in the US Fintech industry, we have all been wishing, hoping and dreaming for a national charter that we can deploy for our products and services to every American with a single product that is not bound by local and state jurisdictions. The Fintech world has been desperately hoping for a national charter that regulates digital payments, cryptocurrencies, mobile wallets and more. Fintech seeks to provide credit to all Americans after banks were handcuffed by the 2008 Dodd-Frank Financial Reform Act.
When the OCC announced the potential for a Fintech Charter, we collectively rejoiced. The concept is what the Fintech sector needs to catapult these innovations into 2017 and beyond. The possibilities seemed immense … until we read the remarks and white paper provided by Thomas J. Curry, the 30th head of OCC. (Note: Curry was appointed by President Obama in 2011 for a 5-year term that expires in April)
OCC’s Proposed Fintech Charter is Anti-Fintech
The proposed Fintech charter is anti-FinTech. That’s right. Many Fintech firm founders started their companies because of the already undue burden placed upon the American populace. Most people struggle to access reliable banking products, cheaper credit, real-time payments and investment opportunities. Unfortunately, these are services and products that are rarely made available for the masses.
From the antiquated investment laws from the Securities and Exchange Commission (SEC) to the outdated State banking and lending laws of the last century. Fintech entrepreneurs have created online banking, mobile payments, and crowdfunding platforms by meticulously engineering some of the most innovative solutions based upon laws that were established before the Wright brothers took us into the sky. Think about it!
The OCC’s proposed charter will put us back at least a 100 years.
Although under the guise of “fair access”, “safety and soundness; we this proposal offers zero innovative ideas or modern catalysts to foster creativity and innovation for our country and economy.
The white paper published by OCC spends most of its time arguing that the bureau has the “grounds” and certainly the “right” to establish a Fintech specialty charter. It reads like a legal opinion and argument on why the OCC is the single bureau to establish the Fintech charter and they are the ones that should regulate the charter membership. The white paper does not provide any incentive for Fintech companies to seek membership and gave no consideration to the undue burden the additional regulation will place on Fintech firms and established Fintech startups. It simply does not make any sense for any Fintech companies even to consider applying for the OCC’s proposed Fintech Charter.
Fintech entrepreneurs have dedicated most of their careers to solving some of the most complex issues in our financial system; we don’t have the time, energy or resources to be bogged down by getting a nod from a century old risk committee.
OCC’s Proposed Fintech Charter is Anti-Innovation
One of the central arguments of the OCC’s proposal is that the charter will put Fintech and Banks on the same playing field.
The OCC provided us an illusion that somehow Fintech companies are at a disadvantage and only with a Federally issued bank charter would we finally become competitive to the banks.
This is simply not the case. The Banks support Fintech companies because they are not bound by outdated and overzealous regulation.
Biz2Credit and OnDeck’s deal with Citigroup and JPMorgan Chase are just some of the recent examples where Fintech companies are able to bring innovation to established financial institutions.
Innovative products and services from firms such as SoFi would have died on the table day one within larger institutions that are regulated by bureaus such as the OCC.
It’s quite normal for the OCC to take two years to approve a pricing strategy or an underwriting model from one of their member banks. The OCC simply does not have the resources, expertise, and the understanding to work with, let alone regulate Fintech companies. The aforementioned charter and proposal is simply anti-innovation. Fintech firms and banks alike do not want more regulation.
OCC’s Proposed Fintech Charter is Anti-Competitive
I have spent a fair amount of time recently in Australia and Asia, talking to Fintech founders and CEOs. Regulation and compliance is always a focal point of our conversations. Often, these conversations end up with their perceptive countries Fintech Sandbox.
Regulators around the world have been rushing to establish a Fintech sandbox – first announced by the UK. Great Britain, Hong Kong, Singapore and Australia are all vying to become the Fintech capital of the world by establishing and, sometimes, abolishing their regulatory regime to encourage innovation and better compete in the global economy.
These Fintech sandboxes didn’t happen haphazardly. These are well conceived, strategic initiatives from the perspective government to empower bank and Fintech players alike to introduce, experiment and collect feedback on innovative products that will drive tomorrow’s financial infrastructure.
The USA is Falling Behind
The United States has fallen far behind some of our global competitors such as China, India and the UK. We desperately need Fintech sandboxes and not more in-fighting and political posturing between different bureaus and agencies just to argue whether bitcoin is a currency or a commodity.
The last thing we need is for another government agency to throw its weight around and cast another shadow on our global competitiveness. Before a reverse brain drain takes place, we need our government to work for us and our industry to be competitive.
We all sat on the sidelines and watched Jack Ma’s Ant Financial gobble up MoneyGram and no one batted an eye. We must out innovate and out-compete rest of the world if we are to succeed. The OCC’s proposed Fintech Charter is anti-competitive and, frankly, not what we need.
What we need (Fintech and Banks)
We want the OCC and other agencies to revise their proposal and provide the following:
- A single national charter that allows Deposits, Money Movement and Lending regulated by a single agency and supersedes all state regulation. Not multiple charters for multiple activities and an industry that must adhere to local and state regulations on top of federal rules.
- A Fintech sandbox that immediately allows all Fintech startups to move money through existing and alternative money movement rails. To be able to grant credit, make investments and create mobile wallets for all Americans. We need this Fintech Sandbox to perfect our systems, enhance customer experiences and product offering and most importantly a chance to correct our mistakes.
The comment period of the proposed charter ended on Jan 15th, 2017 and most of us have voiced our opinion directly to the OCC. We are still holding onto hope the OCC, and other regulatory bodies, truly understand the burden which we experience daily and we hope that our government will lead the charge to give us all a fair chance to compete on a global scale.
We are looking forward to the final proposal from the Office of Comptroller of Currency. Innovation is what drives us every day to provide better access, cheaper products and a superior experience for a better life for everyone in the world.
Timothy Li is founder and CEO of Kuber Financial. He has over 12 years of experience in Finance, Technology, Risk Management and is passionate about changing the finance and banking landscape. Li is also the creator of Fluid App, the next generation of credit products for Generation Z and co-founder and President of P2P Protect, a company that offers P2P insurance products in the US.