The rapid growth of fintech applications is reshaping the competitive landscape for traditional financial institutions, prompting regulators to reconsider how digital financial companies should be supervised. One of the most controversial proposals has been the Office of the Comptroller of the Currency’s special purpose fintech charter, designed to provide certain fintech firms with a federal banking framework. Research from Mercator Advisory Group highlights growing concerns from banks and state regulators, who argue that fintech charters could create uneven competition, weaken state oversight, and fundamentally alter the balance between innovation and regulation in the financial services industry.
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Data for today’s episode is provided by Mercator Advisory Group’s report – Fintech and Debit Cards: Battling for Consumers’ Attention.
3 objections to the OCC’s introduction of special purpose (fintech) bank charter:
- Fintech Charters are primarily designed to support lending products and services
- Banks argue that fintechs are being given a unique charter with fewer requirements to compete directly with financial institutions
- State banking regulators believe their authority is being usurped by the federal charter
- Today, fintechs pursue money transmitter licenses in each state
- Because a fintech charter requires significant reserves & strong financials, only the largest fintechs can participate
- Fintech Charters were proposed by the OCC in 2016 vs. Industrial Loan Charters in 1900s
About Report
Consumers looking for help to manage debt, track their spending, create savings, or make inexpensive stock trades are in luck. The number of apps available to help them manage every aspect of their finances is growing seemingly exponentially. Many of them from financial technology companies, fintechs, that seek to disrupt the traditional banking industry. And many of these apps rely on access to users’ banking data that users prefer to have updated automatically rather than type it in manually. Without mandated security standards like the open banking standards in the European Union, data ownership and the protection of that data are in question.
Fintech and Debit Cards: Battling for Consumers’ Attention, a new research report from Mercator Advisory Group analyzes this new market, reviews a variety of apps budgeting, coupons and rewards, saving, and investing, and offers advice to banks and credit unions on ways to avoid disruption by the fintechs.
“The market for personal financial planning apps has matured in the last couple of years. The quality of the advice and interactions with users has really improved. These apps depend on getting the individual consumers’ banking data, however, and that is raising questions about data ownership and security here in the United States, where open banking hasn’t been codified,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group, and author of the report.
This research report has 16 pages and 2 exhibits.
Companies mentioned in this report include: Acorns, Albert, Amazon, Apple, Betterment, BMW Bank of North America, Citigroup, Digit, Dosh Every Dollar, Facebook, GasBuddy, Mint, Nelnet, Qapital, Robinhood, Sallie Mae Bank, Simple, SoFi, Square, Stanford Federal Credit Union, Stash, Trim, WEX Bank, and You Need a Budget.
