US Treasury says regulators need to “robustly supervise” bank-fintech relationships
A new report from the US Department of the Treasury has recommended “enhanced” supervision of fintech and bank partnerships, after finding that fintechs are creating “new risks” to consumer protection and market integrity.
The report, ‘Assessing Impacts of New Entrant Non-bank Firms on Competition in Consumer Finance Markets’, is a result of President Joe Biden’s July 2021 Executive Order, ‘Promoting Competition in the American Economy’.
Among its findings are that new entrant “non-bank” firms – or fintechs – are adding “significantly” to the number of firms and business models competing in core consumer finance markets and “appear to be contributing to competitive pressure”.
Some of the risks posed to consumers by fintechs relate to data privacy and regulatory arbitrage, the US Department of the Treasury said.
The report sets out a number of steps to be taken to protect consumers, and to encourage “fair and responsible” competition in the industry.
To address market integrity and safety and soundness concerns, the report suggests that regulators should provide a “clear and consistently applied supervisory framework for bank-fintech relationships”.
It also recommends that US regulators should “robustly supervise” bank-fintech lending relationships for compliance with consumer protection laws and their impact on consumers’ financial wellbeing.
“Innovation and competition must work hand-in-hand in a healthy economy,” US Secretary of the Treasury Janet Yellen said.
“While non-bank firms’ entrance into core consumer finance markets has increased competition and innovation, it has not come without additional risks to consumer protection and market integrity. This report lays out actions that would maintain fair, transparent, and competitive markets while encouraging responsible innovation that benefits consumers.”
She added: “With existing authorities, regulators can encourage competition and innovation while further safeguarding and protecting consumers.”