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Two Regulatory Battles Fintechs Should Watch

It's going to be a tumultuous year for the legislation that regulates fintech companies. These two big legal battles will shape the years ahead.

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Two Regulatory Battles Fintechs Should Watch

  1. 1. © IdentityMind Global 2017 TWO BIG REGULATORY BATTLES Fintech Companies Should Watch in 2017
  2. 2. © IdentityMind Global 2017 FinTech Regulation in 2017 • There are two large, consequential legal battles that have already started that all FinTechs should pay attention to: • Whatever the outcomes, 2017 is going to be a year of change • Regtech can help FinTechs simplify compliance and be prepared for whatever comes next. OCC vs State Regulators Trump Administration vs Dodd-Frank
  3. 3. © IdentityMind Global 2017 Office of the Comptroller of the Currency State Regulators
  4. 4. © IdentityMind Global 2017 OCC vs State Regulators In December of 2016, the Comptroller stated clearly that the OCC will allow FinTechs to apply for special bank charters. This would allow FinTechs that meet the charter requirements to operate in countrywide in compliance with federal regulations, as opposed to being required to navigate each state’s individual laws.
  5. 5. © IdentityMind Global 2017 While the move has been lauded by FinTechs and industry groups, many state regulatory bodies have taken issue and are questioning the OCC’s authority to issue these charters. So far the loudest and toughest opposition comes from the New York State Department of Financial Services, a notoriously stringent regulatory body that exerts a great amount of national policy influence despite being a state agency. OCC vs State Regulators
  6. 6. © IdentityMind Global 2017 Who’s going to win, and what does that mean for FinTechs? OCC vs State Regulators State regulators do not seem to have the legal grounds to fight the validity of the OCC’s new charters for these key reasons. Support for state-level regulation is not ubiquitous - some state regulators have acknowledged that state-licensing has major flaws. FinTechs operate across states lines, and so should be able to abide by federal guidelines. State regulators’ concerns over consumer protections laws can be addressed by OCC oversight.
  7. 7. © IdentityMind Global 2017 Advantage: OCC OCC vs State Regulators Who’s going to win, and what does that mean for FinTechs? OCC vs State Regulators While simplified compliance is definitely a good thing for Fintechs, they are not out of the woods yet. The requirements to qualify for the special bank charter were recently released and have been criticized as burdensome for smaller companies. Plus, if state regulators - in particular NYSDFS - are able to push back, it will alter the compliance landscape dramatically. Fintechs in a position to meet the charter requirements should consider applying, as so far it appears that their validity will be respected and chartered FinTechs will be able to operate under simplified regulations.
  8. 8. © IdentityMind Global 2017 • Trump vs Dodd-Frank The Trump Administration vs Dodd-Frank Reforms
  9. 9. © IdentityMind Global 2017 Trump vs Dodd-Frank In February, President Trump signed an executive order commanding the review of the Dodd-Frank reforms. While there has been a lot of rhetoric about repealing it altogether, so far the only thing that has truly been started is an assessment.
  10. 10. © IdentityMind Global 2017 Trump vs Dodd-Frank What if Dodd-Frank is repealed, and what would that mean for FinTechs? Good Bad • Easing of regulations would simplify compliance
 • With more lax regulation, big banks may be encouraged to more aggressively acquire or partner with FinTechs • Eased regulations on big banks could enable them to compete with FinTechs in smaller markets
 • Section 1033 of Dodd-Frank gives consumers the right to their financial data. Banks could cut off this vital source of data for FinTechs.
  11. 11. © IdentityMind Global 2017 Trump vs Dodd-Frank Repeal would be difficult and slow, if it happens at all. • The Dodd-Frank rule isn’t a single law, but a collection of almost 300 regulations • A repeal would take time and judiciary review • States have stated they will fill enforcement gaps if the law is repealed. • FinTechs should monitor developments closely as this administration’s general hostility to regulations and the rising impetus for FinTech-specific regulation will butt heads many more times this year. Bankers-Here-Again-12-01-2016#_ftn5 Stalemate (for now)
  12. 12. © IdentityMind Global 2017 2017 is going to be complicated. RegTech can simplify. FinTech Regulation in 2017 Automated Reporting Reduced Manual Review Time One-Click SAR Filing Streamlined Case Management Regulatory requirements are going to be in flux. The right RegTech solution will keep compliance costs down, and give you the data and reporting to be prepared for whatever comes next. IdentityMind for Fintechs Accelerated Compliance & Advanced Fraud Prevention LEARN MORE