Regulatory Riddles


Financial regulators leave a lot to speculation in their public speeches. They leave clues and indicators but, knowing market participants are eager for early policy indications, they are careful not to say much.

This came to mind in the last week after reflecting on talks by two of the top financial regulators in the United States who spoke on FinTech regulation at Northwestern University’s Kellogg school of business. In the end, I concluded that they were talking mostly about the bounds of their agencies and how they relate to other regulators.

Thomas J. Curry, the U.S. Comptroller of the Currency, reviewed his office’s agenda for innovation, including its “office hours” program. FinTech firms and financial institutions can meet with OCC regulators and run ideas past regulators, educating one another on financial technologies and potential regulatory hurdles.

It’s similar to the Consumer Financial Protection Bureau’s Project Catalyst, announced last fall. Neither program offers official guidance, but it’s all to the good. Yet it leaves startups and institutions to sort through the competing agenda of two agencies, in addition to the agendas of other federal and state regulators. Law firms are responding with comparisons of the OCC and CFPB programs.

The Federal Reserve is even more reserved. Federal Reserve Board Governor Lael Brainard’s speech covered the technology landscape but skirted direct statements on the OCC’s and CFPB’s outlines. We are left with outlines of outlines.

Would any FinTech ever chartered by the OCC under its proposed program have to be a Federal Reserve member? It isn’t likely that Fed member banks would want that.

Would the Fed require consumer access to financial data held by its member institutions? The CFPB has said banks should prepare to do so. Fed member banks likely wouldn’t want that either. We’ll have to wait and see.

In the meantime, state regulators have sued the OCC for overstepping its bounds by proposing a federal regulatory regime for FinTech firms. The Trump Administration indicated last week that it would replace Curry, who warned regulators to avoid turf fights. The CFPB has been a thorn in the side of Congressional Republicans since its founding, leaving any proposals and statements on FinTech regulation in doubt.

FinTech firms and financial institutions want clear regulatory direction more than anything else. They will have to wait.


The FinTech revolution is nigh. Our next move is critical.

FinTech needs a national regulatory plan built for the 21st century, not a rewrite of the 20th century Glass-Steagall Act, argues Allan Grody in The Hill. Otherwise, the opportunity revolutionize financial services could be missed. “Instead of a myriad of regulators and industry members approaching this piecemeal, a comprehensive industry/government partnership is needed to guide the country and to lead the world in rewiring the financial system,” he writes. The problem may be “premature competition among regulators and financial industry members.” Imagine that.

Can public-sector organizations become Fintech disruptors?

In European capital markets, at least, the answer is Yes, writes Kalin Anev Janse, secretary general and member of the management board of the European Stability Mechanism (ESM), Europe’s lender of last resort. “Market inefficiencies stand in the way of a truly integrated financial market in Europe, and therefore in the way of financial stability,” he argues. “We are living in the fourth industrial revolution: Technology, artificial intelligence and robotics are challenging the way we work. . . The FinTech expertise of the ESM can help us achieve this important policy goal.”

The gig is up.

“Income volatility is a growing problem for U.S. households, and the gig economy is only making it worse. Banks and FinTech companies are trying to help consumers cope,” writes Alan Kline for American Banker. Income has become increasingly variable for many households making less than $50,000 a year. The article profiles FinTech startup Digit, designed to give lower-income workers greater control over their finances, helping them to avoid high overdraft fees and make small-dollar installment loans at more reasonable rates than payday lenders.

Data from cash disruption: A clear advantage for FinTech firms

Worldwide, cash is still the most-used form of payment, with an estimated 80% or $1.4 trillion in consumer transactions paid in cash, according to ARK Investment Management. At the same time, it’s also one of the most expensive, least secure, and most difficult to track. “Given the tens of billions of cash transactions occurring daily around the world, companies and financial institutions have little or no insight into a large and increasingly important swath of their customers. To capitalize on this opportunity, the traditional payments model will have to give way to change,” writes Bhavana Yarasuri, an ARK Analyst.

Digital wallets: the reason millennials are going cashless?

The cash situation is somewhat different in developed nations, though the value of the data is the same. Millennials increasingly are carrying less than $5 cash on average and making more transactions with mobile devices. Even so, “while Millennials are embracing digital wallets, 58 percent of Millennials still want to get paid with cash because there aren’t any transaction fees involved,” writes Angela Ruth for Due.

Banking bots highlight conversational commerce trend

“Western Union has built a chatbot that lets consumers wire money by conversing with a digital assistant in Facebook Messenger,” writes Clint Boulton for CIO. The money-transfer firm joins several banks in developing chatbot technology for financial services. Buolton gives an update on the major banking chatbot initiatives.

The global digital insurance landscape

This infographic from digital insurer One provides a good overview of the fully digital insurance carriers operating globally. These insurers seek to change the core underwriting model of the business, with a focus on providing insurance on demand.