All financial services will eventually be Fintech services, but some traditional financial firms struggle to become digitally native. Traditional banks, typically smaller ones, fall into this category. Most of these smaller banks have purchased services from Fintechs, thus providing modern platforms – others have partnered with Fintechs to provide updated services. Few have gone it alone.
Today, Republican members of the Task Force on Financial Technology (Fintech) asked Comptroller of the Currency Michael Hsu to ensure that bank and Fintech partnerships can continue by requesting certainty from the bank regulator.
Led by Representative Patrick McHenry, the ranking member on the House Committee on Financial Services, the group of Representatives asked Hsu to make certain innovation is safeguarded.
In a letter addressed to Hsu, the members stated:
“Innovation is a critical component of the US economy, and we are concerned with the potential for further uncertainty around partnerships and the consequences for consumers. New financial products and services can drive down costs and foster greater inclusion and competition in our financial system. Under the previous administration, the OCC worked to provide banks and their customers with a clear understanding of the regulatory and supervisory expectations surrounding emerging products and services and how to properly assess risk. While we expected the OCC to continue to provide clear rules of the road and support innovative banking services, such has not been the case.”
The letter pointed to the Office of the Comptroller of the Currency (OCC) recently not mentioning innovation in its support of community banks, as a policy priority.
“Let us be clear. Technological innovation fostered by Fintech partnerships has enabled banks to reach segments of the population that may have been left behind and increase customer engagement. Much of this innovation has been driven by industry newcomers that have developed a novel product or business model. When properly regulated, these partnerships can provide greater financial inclusion, spur technological innovation, and foster competition that ultimately benefits consumers.”
The letter noted the basic fact that it is typically more cost-effective for a smaller bank to partner with a Fintech to offer modern, digital financial services.
The members said that these partnerships can deliver value for banks as well as their customers with faster, less expensive and more sophisticated services for more customers.
Many observers are predicting that the House will flip control to the Republicans this November, bringing Republican leadership to the various committees, including financial services. This could mean more consumer and innovation-friendly legislation, supportive of Fintech.