An article in Forbes tackles the topic of Big Tech’s desire to “disrupt” financial services. Google, Facebook, and Apple, among others, tout their plans to better serve the public through their account offerings, particularly the unbanked and underbanked. Where does banking regulations come in?
While that altruistic wrapping sounds great, many will contend it is just a means to harvest data. Now the concern that Silicon Valley is getting away with “banking without a license,” and legislators on both sides of the aisle are maybe going to take action. From the article:
Companies like Google, Facebook, and Uber, are increasingly setting their eyes on a prize some 2,500 miles away from their campuses in the suburbs of San Francisco: Wall Street.
It’s time, they say, to “disrupt” the financial services industry. Some lawmakers (and banks), however, aren’t too pleased with the idea of skirting oversight regulations in the name of technological progress.
Big tech is moving full-speed ahead into the banking sector, but a new cluster of bipartisan and bicameral legislative proposals that seek to restrict companies like Facebook and Google from entering financial services are gaining the approval of bank lobbyists and progressive oversight groups alike.
If banks believe that these tech companies are getting away with rigorous oversight of their practices, they have only themselves to blame. Apple is issuing its Apple Card through Goldman Sachs. Google announced checking accounts though Citi and Stanford Federal Credit Union.
It’s the banks’ role to ensure that the products and practices meet all the requirements and banking regulations that these organizations follow to offer similar services themselves. It is up to the financial institutions’ regulators to ensure that they are, in fact, enforcing their compliance policies across all business, including resellers and agents.
This kind of relationship between banks and non-banks that want to resell a white labeled or cobranded solution has been going on for decades. No new news here. What is new is the current desire to bring Big Tech to account:
“These companies have seen a lot of opposition on the Hill,” said Paul Merski, chief economist of the Independent Community Bankers of America. “They’re not doing anything innovative by skirting the regulations that others have to abide by. It’s not really innovation to say ‘rules and regulations don’t apply to me,’” added Merski, who also oversees congressional relations teams and legislative and political action committee initiatives for the trade organization.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group