Regulation was the subject of one of the four parallel tracks that ran during the afternoon of the first day of Money20/20.
First up was a discussion of the controversial issue of privacy and data security, with Russ Schrader of Commerce Signals. He highlighted the recent data breach at Equifax and multi-million dollar fines on other companies that have suffered similar problems as evidence of the criticality of this issue.
Schrader also assessed the fundamental differences in approach to privacy between the US and the EU. The EU holds privacy to be a fundamental human right and enforces strict controls upon holders of consumer data. Meanwhile, the US takes a more pragmatic view and assesses the issue of harm to the consumer on a practical, case-by-case basis. Thus, US firms that operate in the EU must abide by tighter regulations in that jurisdiction, meaning they must decide whether to operate a system of dual standards, or adopt a unified code of conduct that satisfies regulators across all markets.
Christopher Woolard of the UK’s Financial Conduct Authority (FCA) enlightened the audience about the regulator’s sandbox initiative, where new entrants and providers with new products are given the opportunity to test their propositions in a safe environment. The program, now on its third cohort of participants, has been deemed a success by the FCA. 40% of firms in the first cohort have received further funding to pursue their objectives, and 90% have moved closer to a market launch.
There was a lively discussion on the controversial issue of bank charters in the US, in which Thomas Curry, former head of the Office of the Comptroller of the Currency (OCC) explained the reasoning behind his push to grant special purpose national bank charters to fintech providers. This move has been deeply unpopular among state regulators, which view this as an infringement of their jurisdiction, a dispute that has been previously covered by GlobalData. Curry stressed that special purpose charters are not about undermining state regulators, but about giving fintechs other options.
The panel’s consensus was that the US’s dual banking system, comprising federal and state regulation, has been effective, and that where there has been tension between the two, this often promotes new and creative ways of regulating the financial sector.
Another panelist, Richard Neiman of Lending Club, was supportive of the OCC’s approach. He thought that special purpose charters will help alternative lenders by creating a nationally consistent body of regulation and compliance, and that federal regulation will assist Lending Club with its strategic partnerships with credit unions.
In summary, the sessions on regulation touched on a wide range of issues. If there was one clear message, however, it is that regulators are responding proactively to the rapidly changing environment that has been driven by new technology, and want to play a positive role in helping new providers to thrive, while ensuring the stability of the sector is maintained.
By Daoud Fakhri, Prinicipal Retail Banking Analyst