We are far away The United States is a utopia for Fintech

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UNITED STATES – JUNE 13: Joseph Otting, currency controller, prepares to testify during an audition of the House's Financial Services Committee in 39; Rayburn building entitled "Regulation of the financial industry: the Office of the Currency Controller," on 13 June 2018. (Photo by Tom Williams / CQ Roll Call)

The US Treasury and The Office of the Currency Controller (OCC) both made headlines last week with announcements related to fintech, Treasury published a 222 page report on the topic of Nonbank Financials, Fintech and Innovation, while # 39; OCC almost immediately followed up with the news that it would finally started to accept Applications of the National Bank Charter by fintechs, in line with the Treasury's recommendations.

How sure I am that everyone, even with a passing interest in fintech, knows by now that both the US Treasury report and the OCC decision have been met with a mixed answer if from the sector. The general consensus is that it is a step in the right direction, but it hardly surfaces the surface in terms of what needs to be done to facilitate the path of startups in the financial services industry in the United States.

I read the Treasury report so it is not necessary

This whopper of a Treasury report examines the current US regulatory framework for "non-bank financial institutions", currency the impact on innovation and makes recommendations to bring the legislation in line with a set of fundamental principles established by the Trump Administration. These principles are, in general, designed to: improve the financial health of consumers, strengthen industry at the national level and on the international scene and stimulate economic growth. The recommendations, in general, address the obstacles to achieving these objectives, largely through the search for ways to simplify the regulatory framework and harmonize the different regimes.

But, and it's a huge but, they are simply recommendations. There are still many obstacles to overcome, such as the federal and state regulators accepting the proposals first, even before arriving at a stage where they agree to work together and implement them.

There is also the fact that some of the recommendations, while being good for businesses, are not so great for consumers. For example, by revoking the so-called "payday rule" which requires lenders to assess whether borrowers can afford a loan and limit the number of loans that can be extended to a borrower, without guaranteeing an adequate protection for vulnerable consumers in the long run would probably be harmful to individuals and the economy.

In summary, the report of the American Treasury seems positive and supportive on paper, but it will be a long time before it gets much & nbsp; Meanwhile, the US fintech will continue to struggle with the complex and complicated regulatory system of the country that prevents many good ideas from coming to fruition because entrepreneurs are simply too scared to try. Successful businesses will remain few and will largely be dominated by technology companies for the foreseeable future.

The OCC faces an uphill struggle

So, on the announcement of the OCC. The decision to authorize fintechs to apply for Special Purpose National Bank (SPNB) licenses has been on the way for a long time. The idea was launched for the first time two years ago and the OCC has since faced serious resistance from both state regulators and bank pressure groups. One of the most resounding opponents remains the superintendent of the New York DFS Maria T. Vullo who almost immediately after the Treasury and the OCC made their announcements his saying the card:

"… clearly [and] will impose a completely unjustified federal regulatory regime on a fully functioning and deeply rooted state regulatory landscape".

This opposition is likely to be expected from groups that feel threatened or from federal regulators entering their territory, or the potential for the fintechs to grow and steal their clients.

What do the fintechs think?

Those with whom I spoke are cautiously optimistic but believe that there is still much work to be done when it comes to creating a more competitive landscape that allows innovation to thrive. Money transfer service based in the United Kingdom

Transferwise
that expanded in the US in 2015, thinks that the efforts of the OCC are not sufficient. Head of the banking sector, Andrew Boyajian summarized the position of the company in a statement:

"While we are satisfied with the decision of the OCC at the federal level, a card that does not offer Fintech companies access to payment systems (ACH , FedWire and systems developed in the future) does not go far enough, TransferWise favors policies that level the playing field between Fintech companies and traditional banks. "

TransferWise is in a relatively unusual position for a fintech since it has operations significant in several countries, giving them the advantage of knowing what the other regulators do first hand. Boyajian told me that as far as he is concerned, the OCC initiatives "stop before some of the other initiatives we have seen all over the world". In particular, serious gaps remain when it comes to offering fintech access to infrastructure such as payment systems (for example, the Federal Reserve in the US) and providing clearly defined frameworks for different types of startups (eg credit vs payment service providers).

When it comes to the Treasury view of the regulators, Boyajian is also somewhat skeptical. He believes there are benefits for a central player who has a mandate to strengthen and encourage competition in the industry. And while some groups are struggling to simplify and centralize the rules, it does not seem likely that it will soon arrive from the United States.

"I have not seen either the Fed or the Treasury express that they have a mandate to do this, but what we see is this tension between the different regulators …. The situation we are due to our regulatory structures is that now all the other state regulators and the various commissions must be convinced that this is the best way to advance [so] when we think about financial services in the United States, while there are many efforts, there are also states in competition and all seem to have their own agenda at this point "

Bank Account Provider Chime one who might think he is an ideal candidate for the OCC card has a similar perspective when it comes to the regulatory status in the United States . Chris Britt, CEO of Chime, said:

"Overall, I think these developments are good first steps and can be positive for consumers, and hopefully they will help pave the way for other consumer-friendly fintechs to scale them down. without the same regulatory bureaucracy.Unfortunately, our fragmented banking regimes here in the US will make innovation in financial services somehow stimulating. "

We are very, very far from the United States as a utopia for fintech

the problem is that for fintech really flourish we need many and many start-ups and that these companies feel confident they can operate legally across the country to attract investment and avoid ridiculous compliance costs. Right now, the regulatory environment is a huge obstacle to this and is causing the fall of the United States behind other countries when it comes to developing a thriving fintech sector that even the Treasury recognizes, saying:

"Like the rest of the world takes steps to enable innovative financial products and services, the United States risks losing by failing to provide regulatory clarity and remove unnecessary barriers to innovation. "

In the meantime, OCC and its controller will need nerves of steel and buckets of determination – and time – to actually start issuing licenses that are recognized everywhere. And this is only the first step towards the utopian environment startups, and the government, they hope.

Meanwhile, regulatory expert dr. Sian Lewin held that the fintech regulation became a & nbsp; "Football Politician" & nbsp; in some places used to attract votes and score points rather than implement any practical change, it remains appropriate.

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UNITED STATES – JUNE 13: Joseph Otting, Controlling the Currency, prepares to testify during a" hearing of the House Financial Services Committee at Rayburn Building entitled "Regulation of the Financial Industry : the office of the currency controller ", June 13, 2018. (Photo by Tom Williams / CQ Roll Call)

The US Treasury and the Office of the Currency Controller (OCC) both have made news with announcements related to the fintech The Treasury published a 222 page report on the theme Nonbank Financials, Fintech and Innovation, while the OCC is almost immediately followed with the news that it would finally begin to accept the National Bank by fintechs, in line with the Treasury's recommendations

How I am sure that everyone, even with a passing interest in fintech, now knows both the US Treasury report and the decision of the OCC has been accepted with a mixed response from industry. The general consensus is that it is a step in the right direction, but it hardly surfaces the surface in terms of what needs to be done to facilitate the path of startups in the financial services industry in the United States.

I read the Treasury report so it is not necessary

This whopper of a Treasury report examines the current US regulatory framework for "non-bank financial institutions", currency the impact on innovation and makes recommendations to bring the legislation in line with a set of fundamental principles established by the Trump Administration. These principles are, in general, designed to: improve the financial health of consumers, strengthen industry at the national level and on the international scene and stimulate economic growth. The recommendations, in general, address the obstacles to achieving these objectives, largely through the search for ways to simplify the regulatory framework and harmonize the different regimes.

But, and it is huge, but they are simply recommendations. There are still many obstacles to overcome, such as the federal and state regulators accepting the proposals first, even before arriving at a stage where they agree to work together and implement them.

There is also the fact that some of the recommendations, while being good for businesses, are not so great for consumers. For example, by canceling the so-called "payday rule", which requires lenders to assess whether borrowers can afford a loan and limit the number of loans that can be extended to a borrower, without ensuring adequate protection for vulnerable consumers, probably in the long run damaging both individuals and the economy.

In summary, the US Treasury report looks positive and supportive on paper, but it will be long before it arrives very directly ] Meanwhile, the US fintech will continue to struggle with the complex and complicated country regulatory system that prevents many good ideas from coming to fruition because entrepreneurs are simply too scared to try. Successful businesses will remain few and will largely be dominated by technology companies for the foreseeable future.

The OCC faces an uphill struggle

So, on the announcement of the OCC. The decision to authorize fintechs to apply for Special Purpose National Bank (SPNB) licenses has been on the way for a long time. The idea was launched for the first time two years ago and the OCC has since faced serious resistance from both state regulators and bank pressure groups. One of the most influential opponents remains the superintendent of the New York DFS, Maria T. Vullo, who almost immediately after the Treasury and the OCC published their announcements, stating the card:

"… clearly it is not authorized by the National Bank Act … [and] will impose a completely unjustified federal regulatory framework on a fully functioning and deeply rooted state regulatory landscape ".

This opposition is likely to be expected from groups that feel threatened by federal legislators trampling on their territory, or by the potential for the fintechs to grow and steal their clients.

What do the fintechs think?

Those I spoke with are cautiously optimistic but I think there is still a lot of work to do when it comes to creating a more competitive landscape that allows innovation to thrive. Money transfer service based in the United Kingdom
Transferwise
which expanded in the United States in 2015, thinks that the efforts of the OCC are not sufficient. Head of the banking sector, Andrew Boyajian summarized the position of the company in a statement:

"While we are satisfied with the decision of the OCC at the federal level, a card that does not offer Fintech companies access to payment systems (ACH , FedWire and systems developed in the future) does not go far enough, TransferWise favors policies that level the playing field between Fintech companies and traditional banks. "

TransferWise is in a relatively unusual position for a fintech since it has operations significant in several countries, giving them the advantage of knowing what the other regulators do first hand. Boyajian told me that as far as he is concerned, the OCC initiatives "stop before some of the other initiatives we have seen all over the world". In particular, serious gaps remain when it comes to offering fintech access to infrastructure such as payment systems (for example, the Federal Reserve in the US) and providing clearly defined frameworks for different types of startups (eg credit vs payment service providers).

When it comes to the Treasury view of the regulators, Boyajian is also somewhat skeptical. He believes there are benefits for a central player who has a mandate to strengthen and encourage competition in the industry. And while some groups are struggling to simplify and centralize the rules, it does not seem likely that it will soon arrive from the United States.

"I have not seen either the Fed or the Treasury express that they have a mandate to do this, but what we see is this tension between the different regulators …. The situation we are due to our regulatory structures is that now all the other state regulators and the various commissions must be convinced that this is the best way to advance [so] when we think about financial services in the United States, while there are many efforts, there are also states in competition and all seem to have their program at this point "

Chime bank account provider, a company that one might think is a major candidate for the OCC card has a similar perspective when it comes to the regulatory state in the United States. Chris Britt, CEO of Chime, said:

"Overall, I think these developments are good first steps and can be positive for consumers, we hope they help pave the way for other consumer-friendly fintech scales without the same regulation Unfortunately, our fragmented banking regimes here in the US will make innovation in financial services somehow stimulating. "

We are very, very far from the United States as Utopia for fintech [19659059] The problem is that for flourishing we really need many and many start-ups and that these companies can feel confident that they can operate legally at a national level to attract investment and avoid ridiculous compliance costs. this is causing the fall of the United States behind other countries when it comes to developing a truly thriving fintech sector that the Treasury also recognizes, stating:

"How the rest of the world takes measures to enable innovative financial products and services, the United States risks losing by failing to provide regulatory clarity and remove unnecessary barriers to innovation. "

In the meantime, OCC and its controller will need nerves of steel and buckets of determination – and time – to actually start issuing licenses that are recognized everywhere. And this is only the first step towards startups in the utopian environment, and the government, they hope.

Meanwhile, the normative expert Dr Sian Lewin noted that the fintech regulation became a "political football" places used to attract votes and score points rather than implement any practical change, remains appropriate.

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