Letter from the Editor

Competition in the U.S. economy may decide who most of the winners and losers are. But often, it’s the regulatory environment that sets the stage for who will have a winning business plan and who won’t. After all, it’s the government and our system of state and federal laws that decide what the ground rules are for the sandbox in which we play.

Recently, the Office of the Comptroller of the Currency announced plans to let fintech companies get a special purpose banking charter. This has been pushed for some time by fintech companies, who would benefit from a clear regulatory framework that a national charter would provide and a set of rules by which they can innovate and grow.

For banks, they could benefit if fintech companies are allowed to innovate and provide better products at a lower cost. Plus, banks may feel more comfortable doing business with fintech companies that are regulated at the federal level, just like they are. But it’s worth noting that not just small companies that sell products and services to banks may be interested in getting federal banking charters.

So might be the global behemoths such as Google, Amazon, Facebook and Wal-Mart. Wal-Mart Stores tried to get a special purpose banking charter almost a decade ago, which was roundly rebuffed by the banking industry, and it abandoned its attempt in 2007.

But what’s to say Wal-Mart can’t try that again? And this time, the regulatory environment may be more attuned to its application. For the banks that don’t feel threatened by competition from Wal-Mart, what about Facebook or Google? A recent Accenture report found that 31 percent of 32,000 consumers polled online globally were willing to do banking with a Facebook, Google or Amazon. In the U.S., 37 percent of consumers said they would. That figure rises when you start polling millennials. The survey was conducted May through June of 2016.

Facebook has already gotten into the payments business. Amazon already sells credit cards, and Google has gotten started in the financial world with Google Wallet. The advantages that a Facebook and a Google have over most banks is obvious: They are global brands and viewed positively, unlike big banks, whose reputations were tarred by the financial crisis. They also have an advantage in that they are masters of data and contain troves of information on consumers across the globe, which they easily use for their marketing advantage.

In the years ahead, it’s entirely possible that a Facebook or a Google will get a banking license. That’s not to say they can’t offer financial services without it, but it could pave the way for a more secure regulatory environment for these companies to give Bank of America Corp. and Wells Fargo & Co. a run for their money, and to further put pressure on small, community banks to create a niche for themselves that the big players won’t handle.

Of course, no one knows for sure what the next decade holds for banking. But it’s worth considering the potential impact of a federal fintech charter, and how that might change the rules of the game.