Anyone paying attention to the fintech sector knows that there are a lot of Silicon Valley startups providing many services similar to traditional banks.
From a recent article in Minneapolis’ Star Tribune:
“The Office of the Comptroller of the Currency on Friday said it plans to start accepting applications from financial technology companies for a special charter that would formally subject them to federal banking rules. Companies that become chartered will get the benefits of being an established company in the eyes of the government. But they will also face anti-money laundering controls and consumer protections that apply to other lenders, the OCC said.”
Since such a ‘special’ charter would come with specific regulations that the banking industry itself often doesn’t regard with tremendous enthusiasm, it will certainly be interesting to see how the fintech sector evaluates the cost vs. benefit equation. The value of clear standards for an industry that’s starting to experience headwinds could allow just the right amount of framework to propel recent much-needed innovations (e.g. distributed ledger technology).
But, in addition to losing its autonomy from the banking industry, does the fintech sector stand to lose something far more elusive and dear? How much is its reputation of standing against ‘big banking’ really worth? How, as the article points out, will fintech regard the idea of a regulatory environment that may be in direct conflict with its ‘run fast and break things’ modus operandi? And what will that mean for innovation in a sector who’s identity is so intrinsically linked with innovation?
One thing is for certain, any approach to such an environment would demand much greater data standardization, and it would probably be most effective if the development and application of such standards originated from within a close collaboration between fintech and banking industry best practices and standards groups. If fintech decides to take advantage of the ‘special’ charter opportunity, then new partnerships will need to be forged where they haven’t existed before.
See the full article at: http://strib.mn/2gOVvsk
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