Fintech is a new type of thing. It’s a novel industry which aims to use the current computer, communications, and financial technology to empower users who have traditionally been left out of the traditional financial system because they can’t afford to be included. Paypal is probably the leading company on this, but there are many others, and some of them are also involved with cryptocurrencies and crypto-based technology.
And because those companies are relatively new and they have their feet in different worlds (financial services, internet services, mobile services, etc) regulators have had a hard time figuring out how to regulate them, which means they’ve been getting a bit on the way, and getting a fintech company started has not been so easy for entrepreneurs because few regulators know what to make of them. And that’s why this is good news.
The local regulators of seven states in the U.S.A. have agreed to make things easier for everybody by simplifying the way in which new fintech companies apply for licenses. It should make things easier for the companies in question, but also for their customers.
The Magnificent Seven
The states in question are Washington, Texas, Tennessee, Massachusetts, Kansas, Georgia, and Illinois. Those seven states will recognize each other’s findings when they judge the fitness of fintech companies that apply for an operating license within those states. That was announced by the national organization of state bank regulators on last Tuesday.
These licenses include a wide range of companies that are offering the latest in financial services. That includes traditional financial services outside the traditional system, but also cryptocurrency (Bitcoin, mainly) exchanges, and things of the sort. Everything where finance meets new technology.
This is the way in which the local governments are answering to complaints by fintech startups. Those new companies have objected in the past to the high cost of getting their business started, but also about all the red tape they need to cut through so they can get started. On top of that, you have to go through the same process in each individual state so that they can operate in the country as a whole.
“This MSB licensing agreement will minimize the burden of regulatory licensing, use state resources more efficiently, and allow for broad participation by other states across the country,” John Ryan, president, and chief executive of the Conference of State Bank Supervisors, announced to the public.
The main federal regulator of banks (the Office of the Controller of the Currency, OCC) is also trying to help make things simpler for the fintech industry. Back in 2016, it proposed a special charter for fintech companies that would allow them to operate as national lenders.
But state regulators were not very happy about the proposed federal charter because they deemed it possibly detrimental to consumer protection.
The fintech industry is rather new and it poses a challenge to the banking industry worldwide. Banks and regulators are trying hard to keep up with new developments, and they’re not always succeeding (at least, not quickly enough). But digital technology will continue to change the way we use our money and move it around the world. So this is good news for everybody.
[Image courtesy of wikimedia.org]
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