TechCrunch has published a very insightful piece on the proposed OCC “fintech charter” in which firms like Paypal can apply to become “special purpose national banks” under federal regulatory scrutiny. We’ve reported on this before and we are in favor of some regulation coming to the markets for fintechs – the question is how much is too much (or too little). Right now there is too little regulation – and in the crowdfunding area – it’s the wild west. While the platforms themselves may be credible – the deals themselves may or may not. Yet, ALL investing ultimately falls under “caveat emptor” – let the buyer beware. We’re in favor of this proposal from the OCC, but as is almost always the case with government, they are literally years behind the industry. We personally believe that all fintechs should be under some level of regulatory scrutiny, but we also believe current financial regulations are crushingly complex and unwieldy.
The future of American fintech may hang in the balance of a pitched battle that has grown in intensity over the past four months. An obscure request for comments on regulatory standards, released by the Office of the Comptroller of the Currency (OCC) last March, has since evolved into a complex turf war between the states and Washington DC.
Caught in the middle is the entire online finance industry, raising the question of just what a ‘fintech’ business really is. Though it hasn’t made many national headlines, this fight may determine the future of innovation, competition, and survival in the fintech world.
The debate centers around a proposal made in December by Thomas J. Curry, the Comptroller of the Currency, in which the OCC details a program for fintech companies to apply for charters as “special purpose national banks.” The charter, which is optional for fintechs, is meant to provide companies with a stamp of approval from the OCC for having generally strong compliance practices. This would essentially be a way for Washington to separate the well-run, “safe” fintech businesses of the world (eg: Paypal) from the shady, exploitative ones (eg: check cashers and payday lenders.)
In theory, the idea has a lot of merit. Though fintech can still be thought of as a relatively young industry, it is growing quickly enough that it may soon determine how most people save, exchange, and invest their money. This proposal comes at a time when the world – from the UK to Germany to India to Korea – is evaluating what kind of guardrails the fintech sector needs…”