Regulating Fintech not easy task – OCC experience


There are no two opinions about how Fintech has revolutionized the BSFI sector in the USA, like no other technology phenomenon.

Chances are also that you are among those who firmly believe that the change which the industry is witnessing today will only get stronger and the technology impact will create a major shift in user behaviour patterns of the coming generations.

There is, however, an insight of caution that regulators want to express. According to reports, experts are busy examining how the technology impact will stand to perform vis-a-vis regulatory effects within the sector.

The move may not come easy, taking the realities on the ground into account.The statements by some of the experts in the business are a good indication of the challenges ahead for a regulatory intervention.

One Chief of a leading Fintech enterprise had this to say, “Fin Tech has ended banking as we know it.”, while another opinion leader voiced it as, “ FinTech will hinder regulatory efforts because it is based on a decentralized model.”

Adding to his initial thoughts, the first commentator above said, “ Regulators are likely to fail not only because they lack technical expertise regarding FinTech, but also because they have always been targeting nodes in the system and never had to face such a peer-to-peer network,”

The Office of the Comptroller of Currency (OCC) has been formulating various strategies and regulatory initiatives that can work within the Fintech environment in the country and the efforts have produced a report aimed to guide regulators in support of the financial innovation. What’s more, the OCC has even added a separate entity named, Office of Innovation, to keep their eyes closely on the developments in the FinTech field.

Every move of development, research innovation, initiative and application that is changing the nation’s BSFI sector through FinTech, is taken into consideration by this independent organization and its impact recorded.

OCC has come out recently with a draft Licensing Manual to help FinTech organizations obtain a limited banking license – a new high in the technology expert’s domain of application.

However, there is a strong FinTech lobby that looks askance at the whole issue. The question they ask is how large a presence the Regulators should have in the FinTech landscape, knowing that the players in the field aren’t exactly banks, technically speaking.

There is also an opinion expressed that continued involvement of the regulators could be counter-productive and the presence of the OCC if unchecked may move into areas that may stifle technology development and innovation.

One incident went strikingly overboard with the Conference of Bank State Supervisors launching a law suit against the OCC for overstepping its authority over state-level regulators.

The situation thus has come to thus far, when one has to sit and take notice at the issues seriously.

One thing is clear. Across the industry today, the debate is on what exactly is the tilting point between state and federal regulators and how these entities should approach the FinTech subject in toto, to strike a perfect balance.

Watch this space for more action.


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