The U.S. Department of the Treasury issued a report Wednesday (Nov. 16) encouraging collaboration between banks and FinTechs, provided it is done responsibly.
The report finds a number of financial technology companies (FinTechs) competing with banks. It argues that while FinTechs have offered new capabilities, they also create new risks to consumer protection and market integrity. It calls for more oversight of non-bank firms.
“Innovation and competition must work hand in hand in a healthy economy,” U.S. Secretary of the Treasury Janet L. Yellen said in a news release emailed to PYMNTS. “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.”
The report comes two months after Acting Comptroller of the Currency Michael J. Hsu said the rising prominence of digital banking and FinTechs could trigger a financial crisis. He said the encroachment of FinTech companies into the traditional financial sector, including via bank partnerships, had led to increased complexity and “de-integration” in banking.
“My strong sense is that this process, left to its own devices, is likely to accelerate and expand until there is a severe problem, or even a crisis,” Hsu told an audience at The Clearing House and Bank Policy Institute’s annual conference in New York.
Last month he amended his comments a bit, saying he wanted to make sure companies monitor their risks.
“Look, bank-FinTech partnerships, they’re here to stay,” Hsu said in the report. “I’m not trying to do away with them. This is the future, so let’s do the future right.”
The two companies have worked together to help client firms to use tools that let them build seamless payment experiences.
Projects like these, said Pierce-Gilmore and Dadiomov, should help do away with the idea that there needs to be a rivalry between banks and FinTechs.
“We’re banking our so-called competitors,” said Pierce Gilmore, “and in fact more than 50% of the FinTechs out there bank with SVB … and companies like Modern Treasury help make us better. There’s room for both of us.”
How Consumers Pay Online With Stored Credentials
Convenience drives some consumers to store their payment credentials with merchants, while security concerns give other customers pause. For “How We Pay Digitally: Stored Credentials Edition,” a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze consumers’ dilemma and reveal how merchants can win over holdouts.
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