American Fintech Council (AFC) has submitted a comment letter in response to the joint Request for Information on Bank-Fintech Arrangements. The interagency RFI includes the FDIC, OCC and Federal Reserve.
The letter states that it is important for these agencies to understand that not all Bank Fintech partnerships are the same and the current regulatory framework asigns ultimate liability to banks in any partnership with Fintechs.
Touting the benefits of FIntechs, the AFC says that these partnerships have boosted access to financial services for historically underserved communities.
At the same time, “responsible bank-Fintech partnerships have also been able to offer new, innovative products and services to consumers.”
“For example, through bank-Fintech partnerships, buy-now-pay-later (BNPL) loans and earned wage access (EWA) transactions have been able to flourish and assist consumers in developing stronger financial lives. While these two products are distinct in crucial ways, they both leverage innovative technologies to effectively serve consumers and expand available alternatives to predatory products. These products allow consumers to smooth their spending, budget more effectively, and, specifically for EWA, receive the pay they are entitled to for completed work prior to the end of an arbitrarily set pay period. In short, these innovative products and services would not be viable without the use of innovative technologies and a partnership between financial institutions and fintech companies.”
Bank-Fintech partnerships also boost competition, according to the AFC.
The letter highlights the challenging relationship between state and federal regulators, asking the government agencies to better coordinate oversight as “uncoordinated examination efforts between federal and state regulators can place an undue burden on both entities within the partnerships.”
Phil Goldfeder, Chief Executive Officer of AFC, says they know, bank-Fintech partnerships have expanded access to credit and banking services to the underserved, adding that millions of customers rely on products enabled by these collaborations.
“… we urge the agencies to adopt a consistent and modernized regulatory framework that supports these partnerships, encourages responsible innovation, and ensures consumer protection.”
“Responsible bank-fintech partnerships are critical to the continued innovation in and improvement of the financial services industry,” says Ian Moloney, SVP and Head of Policy and Regulatory Affairs at AFC. He adds that they recommend the implementation of relevant Suptech tools to improve oversight activities of regulated entities.
“By implementing suptech tools, AFC believes that examiners can more efficiently and effectively examine regulated entities and lower the costs associated with an examination for both the agency and the regulated entity.”
While it is obvious that Fintechs have fueled innovation in financial services there are some policymakers that remain beholden to legacy concerns and thus aim to impede innovation which are beneficial to consumers and businesses.