It may strike some as odd that President Barack Obama’s National Economic Council just published a “Framework for FinTech” paper on administration policy just before departing, but having been a part of several conversations that helped to shape this policy perspective, I see it from a much different angle. Given that traditional financial institutions are increasingly investing resources in innovation along with the challenges facing many regulatory bodies to keep pace with the fast-moving fintech sector, I see this as a pragmatic attempt to provide the incoming administration with ideas upon which to build while making note of current issues. Indeed, we all must appreciate that technology isn’t just changing the financial services industry, it’s changing the way consumers and business owners relate to their finances—and the way institutions function in our financial system.
The Special Assistant to the President for Economic Policy Adrienne Harris and Alex Zerden, a presidential management fellow, wrote a blog that describes the outline of the paper.
I agree with their assertion that fintech has tremendous potential to revolutionize access to financial services, improve the functioning of the financial system, and promote economic growth. Accordingly, as the fabric of the financial industry continues to evolve, three points from this white paper strike me as especially important:
- In order for the U.S. financial system to remain competitive in the global economy, the United States must continue to prioritize consumer protection, safety and soundness, while also continuing to lead in innovation. Such leadership requires fostering innovation in financial services, whether from incumbent institutions or fintech start-ups, while also protecting consumers and being mindful of other potential risks.
Fintech companies, financial institutions, and government authorities should consistently engage with one another . . . [indeed] close collaboration potentially could accelerate innovation and commercialization by surfacing issues sooner or highlighting problems awaiting technological solutions. Such engagement has the potential to add value for consumers, industry and the broader economy.
- As the financial sector changes, policymakers and regulators must seek to understand the different benefits of and risks posed by fintech innovations . . . While new and untested innovations may increase efficiency and have economic benefits, they potentially could pose risks to the existing financial infrastructure and be detrimental to financial stability if their risks are not understood and proactively managed.
A product of ongoing public-private cooperation, I see this just-released whitepaper as a potential roadmap for future collaboration. In fact, as the fintech ecosystem continues to evolve, this statement of principles could serve as a resource to guide the development of smart, pragmatic and innovative cross-sector engagement much like then-outgoing president Bill Clinton’s “Framework for Global Electronic Commerce” did for internet technology companies some 16 years ago.