Recently, the White House invited representatives from the government, nongovernmental organizations and the private sector to discuss how technology and regulation can unite to produce financial services that are more competitive, efficient and fair. I was honored to be in attendance and represent the international money transmitter Remitly.
Already, technology is making everything from international money transfers to mortgages more accessible and affordable. However, the summit brought to light a number of shared challenges. To overcome them, championing the following three policy proposals would help ensure that regulation enables, rather than impedes, the full promise of financial technology.
Federal charter for nonbanks: an idea whose time has come
Many innovative financial services companies, including my own, are not banks. These money service businesses are governed by an uneven patchwork of state regulations. The licensing effort required to establish a national footprint can cost millions of dollars and take years to complete. Even once licensed, ensuring ongoing compliance with a multitude of state and federal requirements imposes substantial costs and pitfalls.
The complexity creates barriers to entry and investment that impede competition and innovation. When financial services were exclusively offered at brick-and mortar branches and agent locations, it made sense to regulate locally. However, as these services migrate to digital businesses that compete nationally or globally, there is a question on whether the existing regulatory model strikes the appropriate balance.
A federal charter would create a more efficient regulatory system without affecting consumer protections, basic safety and soundness or the prevention of money laundering and terrorist financing.
The European Union has already implemented this approach in providing the ability to "passport" financial services licenses from the licensed "home" country to elsewhere in the EU. This approach helps explain the amount of innovation and explosive investment growth in the European fintech sector. To innovate, the U.S. should establish a similar set of rules so that a financial services operator can provide their services nationwide without multiple authorizations.
Whose financial transaction data is it anyway? The consumer's
When I make a bank or credit card purchase, I can easily access my detailed transaction history simply by logging into my account. Given my consent, authorized software programs like Mint.com should be able to access all of my accounts and consolidate my financial activity in a place of my choosing in order to perform useful functions on top of my data.
Until recently, this was not a controversial concept. However, financial institutions are increasingly viewing data access as a threat to direct relationships with customers and have been cutting off data access to services like these.
Congress recognized the need to protect consumer access of their transaction data when it gave the Consumer Financial Protection Bureau, via Dodd-Frank, the power to protect customers' open access to their data. Now that the heavy lifting of the bureau's initial mandate of rulemakings has been completed, it is time to take a hard look at its authority to preserve and to enhance consumers' open access to their financial transaction data.
If consumers could easily port their transaction data from provider to provider as they saw fit, they could more efficiently manage their financial health. With the consumer's consent, financial service providers could use this data to make more accurate lending decisions or to fight fraud and identify theft.
Improve immigration policy
Immigrants have founded 51% of the most successful startups in the United States. Yet, we're shutting out bright, talented people from living and working in this country. While other countries are passing laws to make themselves more attractive to talented, foreign-born workers, the United States turns away more than half of all foreign-born Ph.D.s graduating from U.S. universities in science, technology, engineering and math fields.
As someone who deals with immigration issues regularly, I've seen firsthand how expensive, slow, and filled with traps for the unwary — even for those seeking to work here legally — the process can be. While immigration is a complex issue, the investment in solving the challenge is worth the effort. We should broaden the scope of those eligible to legally work in our country and streamline the bewildering and time-consuming visa process for applicants. We need to build bridges, not walls, if we are to attract the talent that will build the next wave of innovative businesses.
Fintech promises to deliver better financial services to consumers. The pursuit of targeted policy reforms by the fintech community, NGOs and regulators will catalyze competition and innovation in financial services.
Aaron Gregory is vice president of legal for Remitly, an international money transfer provider based in Seattle.