The U.S. Government Accountability Office (GAO) made several recommendations to improve interagency coordination on financial technology, or fintech, companies and their products.
Fintech products are typically designed to bring consumers added convenience and lower costs for financial products. For example, robo-advisers offer low-cost investment advice provided by algorithms instead of humans. However, they may also pose risks that are not always addressed by existing laws and regulations. They may also lead to data security and privacy concerns that could potentially impact overall financial stability.
The extent to which fintech firms are subject to federal oversight varies. GAO noted that regulators could act collaboratively to better ensure that consumers avoid financial harm while benefitting from these services. It identified some practices for interagency collaboration to increase the effectiveness of regulators’ efforts.
The report details fintech benefits, risks, and protections for users as well as regulatory oversight of fintech firms. It also looks at regulatory challenges for fintech firms along with steps taken by and other countries to encourage financial innovation. GAO gathered its data, in part, by conducting interviews with over 120 federal and state regulators, market participants, and regulators in four countries with active fintech sectors and varying regulatory approaches. It is evaluating whether it would be beneficial to adopt regulatory approaches similar to those undertaken by regulators in other countries.
Federal regulators concurred with GAO’s recommendations and stated that they would take steps to improve interagency coordination.