Members Discuss How to Foster Innovation and Encourage Consumer Protection in Rapidly-Evolving FinTech Industry
WASHINGTON, DC – The Subcommittee on Digital Commerce and Consumer Protection, chaired by Rep. Bob Latta (R-OH), today held a hearing to discuss how the financial services landscape has been disrupted by financial technology, also called “FinTech,” over the last decade and the impact this has had on consumers. By and large, technology available today has significantly changed the way consumers interact, manage, and audit their finances. Today’s hearing was an opportunity to better understand how financial technologies are impacting Americans’ everyday lives and what more can be done within this industry to further improve financial well-being.
Chairman Latta kicked off today’s hearing with a discussion on the prevalence of FinTech in Americans’ everyday lives as well as the opportunities, and challenges, that coincide with it. “There are serious opportunities for companies to reach consumers with new products to help them create a rainy-day fund for the first time, pay their mortgage securely, rebuild their credit, budget and manage multiple income streams, and invest their earnings. One of the first questions that comes to mind in any conversation about money is security. Cybersecurity is an ongoing challenge, and one the Energy and Commerce Committee is tackling head on.”
One of the major advantages of FinTech is its ability to improve financial literacy in areas of the country that are traditionally excluded or underserved. Speaking to this point, and elaborating on FinTech’s ability to drive economic and social change, was Javier Saade, Managing Director at Fenway Summer Ventures. He adds, “New technologies can also open up more efficient ways to manage money and control spending. We have seen mobile technology and innovations in distribution enable financial service firms to reach communities that were previously unserved because building a traditional brick-and-mortar presence was not economical.”
Supplementing this same point, was Chairman Greg Walden (R-OR), who relayed, “In Oregon, the percentage of people unbanked or underbanked is slightly higher than the national average. So, if there is an opportunity to help folks engage in commerce, start a savings account, and become more financially secure, we should be giving it serious consideration. FinTech could provide that opportunity.”
Witnesses listen as Chairman Latta gavels in the hearing.
Another discussion present throughout today’s hearing was in regard to the challenges faced by those within the industry. One of which is the barrier to entry for someone looking to capitalize on FinTech in order to create new opportunities. Peter Van Valkenburgh, Research Director at the Coin Center, elaborated on this, stating, “ [t]he state-by-state approach to money transmission licensing…jeopardizes not only permissionless innovation but also responsible innovation.”
Providing an example, he relayed, “A young innovator dreaming of building the financial infrastructure of the future would be well-advised to leave the U.S. Not because she should try and avoid justifiable consumer protections, or do it on the cheap in a foreign state that will look the other way, but—instead—because simply determining what the U.S. regulatory landscape demands from her is a herculean undertaking.”
Jeanne Hogarth, Vice President at Center for Financial Services Innovation noted some of the challenges because of how rapidly the FinTech industry evolves. “The rate of change in both technology and the services and products these technologies enable make “bright line” legislating and rulemaking an anachronism. Consumer protection is still very much needed, but policy makers need to identify the right tools to reshape the regulation of financial services to fit the innovations in the 21st century…”
For more information on today’s hearing, including a background memo, witness testimony, and archived webcast, click HERE.