The intersection of financial services and technology is rapidly changing the lives of citizens in my home state of Illinois and across our country. Potential homeowners can now apply for a mortgage on their phone and get an answer within 15 minutes, rather than in several days. Instead of grabbing a wallet, people can transfer money to almost anyone instantly using an app.
State regulators are committed to building the regulatory platform for the future of fintech that will enhance and accelerate the kind of smart innovation that benefits and protects consumers.
The benefit of state regulation is that we are closer to the consumer and better understand the needs of local communities. But the cost of state regulation is that companies that want to operate nationally have to comply with different state laws and requirements, which can enhance consumer and taxpayer protections, but adds friction. We need to reduce this friction.
That is why in my role as the state bank and financial services regulator for Illinois I recently hosted representatives from local and national fintech companies, along with financial regulators from other states, to discuss fintech regulation and how to make it work better.
The conversation was both vigorous and enlightening. We discussed multistate licensing requirements and the need to further simplify that process. We discussed the need for more uniform money transmission laws, making it easier for companies to enter that particular market. We were told that while the Nationwide Multistate Licensing System — the common platform for state regulation — is a great tool to submit company information to multiple jurisdictions all at one time, a lack of uniformity in state requirements results in regulatory inconsistency, which is a pain point for industry.
Then we dug into the details of standards for financial requirements, such as net worth, bonding and permissible investments. This was another area where the industry said efforts toward more uniformity would reduce barriers to entry and barriers to scale for fintech firms.
We also discussed a concept known as "passporting" or reciprocity, where a firm could use regulatory approval from one state as a passport to operate in another state.
All of these ideas are worth exploring. And I am committed to ensuring this dialogue continues.
To that end, I am calling upon my fellow state financial regulators and the Conference of State Bank Supervisors to convene a fintech advisory group as a means to continue this dialogue. I believe such a group could provide advice and formal feedback on a broad range of important issues impacting this growing industry.
As fintechs continue to evolve in response to the needs of consumers, state regulators must evolve as well to ensure an appropriate system of oversight that not only protects consumers, but fosters innovation. And industry feedback is a key element in our ability to achieve meaningful change.