The House Subcommittee on Digital Commerce and Consumer Protection held a hearing last week on how the financial services landscape has been disrupted by financial technology (fintech) over the last decade.
Rep. Bob Latta (R-OH), chair of the subcommittee, discussed the prevalence of fintech in Americans’ everyday lives as well as the opportunities and challenges that come 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,” Latta said. “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.”
A major advantage of fintech is its ability to improve financial literacy and drive social and economic change, Javier Saade, managing director at Fenway Summer Ventures, said.
“New technologies can also open up more efficient ways to manage money and control spending,” Saade said. “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.”
Rep. Greg Walden (R-OR) said that the percentage of people in Oregon that are “unbanked or underbanked” is just above 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,” Walden said. “Fintech could provide that opportunity.”
Peter Van Valkenburgh, research director at the Coin Center, said it can help foster innovation in the industry among U.S.-based entrepreneurs.
“A young innovator dreaming of building the financial infrastructure of the future would be well-advised to leave the U.S.,” Valkenburgh said. “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 the Center for Financial Services Innovation, outlined a key challenge for fintech.
“The rate of change in both technology and the services and products these technologies enable make “bright line” legislating and rulemaking an anachronism,” Hogarth said. “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.”