We thought our readers would enjoy delving into this report at their leisure. It's long - 222 pages(!) - but filled with excellent insights on a myriad of sectors with the US financial ecosystem. Below we've published just a piece of the intro - "The Summary of Issues & Recommendations" - from the report with a link at the bottom for you to click thru to read the full report. Read up and learn about what our US Treasury Department is thinking and doing around fintech and the financial sector! (Cindy Taylor/Publisher)
"Summary of Issues and Recommendations
Treasury’s review of the regulatory framework for nonbank financial institutions and innovation more broadly has identified significant opportunities to accelerate innovation in the United States consistent with the Core Principles. This review has identified a wide range of measures that could promote economic growth, while maintaining strong consumer and investor protections and safeguarding the financial system. Treasury believes that innovation is critical to the success of the U.S. economy, particularly in the financial sector. Throughout Treasury’s findings, opportunities have been identified to modernize regulation to embrace the use of data, encourage the adoption of advanced data processing and other techniques to improve business processes, and support the launch of alternative product and service delivery systems. Support of innovation is critical across the regulatory system — both at the federal and state levels. Treasury supports encouraging the launch of new business models as well as enabling traditional financial institutions, such as banks, asset managers, and insurance companies, to pursue innovative technologies to lower costs, improve customer outcomes, and improve access to credit and other services.
Treasury’s recommendations in this report can be summarized in the following four categories:
• Adapting regulatory approaches to changes in the aggregation, sharing, and use of consumer financial data, and to support the development of key competitive technologies; • Aligning the regulatory framework to combat unnecessary regulatory fragmentation, and account for new business models enabled by financial technologies;
• Updating activity-specific regulations across a range of products and services offered by nonbank financial institutions, many of which have become outdated in light of technological advances; and
• Advocating an approach to regulation that enables responsible experimentation in the financial sector, improves regulatory agility, and advances American interests abroad. A list of all of Treasury’s recommendations in this report is set forth as Appendix B, including the recommended action, method of implementation (Congressional and/or regulatory action), and which Core Principles are addressed.
Key themes of Treasury’s recommendations are as follows.
Embracing Digitization, Data, and Competitive Technologies
This report catalogues key elements in the evolution of digitization, data, and scalable technologies and highlights areas of relevance to many aspects of financial services, including lending, financial advice, and payments. Treasury recommends that key provisions of the Telephone Consumer Protection Act be updated, and believes closing the digital divide to enable the entire U.S. population to benefit from modern information and communication flow is a priority.
Treasury makes numerous recommendations that would improve consumers’ access to data and its use by third parties that would support better delivery of services in a responsible manner. Treasury has identified the need to remove legal and regulatory uncertainties currently holding back financial services companies and data aggregators from establishing data-sharing agreements that would effectively move firms away from screen-scraping to more secure and efficient methods of data access. The U.S. market would be well served by a solution developed in concert with the private sector that addresses data sharing, standardization, security, and liability issues. It is important to explore efforts to mitigate implementation costs for community banks and smaller financial services companies with more limited resources to invest in technology. Additionally, Treasury recommends that Congress enact a federal data security and breach notification law to protect consumer financial data and ensure that consumers are notified of breaches in a timely and consistent manner.
Removing regulatory barriers to foundational technologies, including the development of digital legal identity, is important to improving financial inclusion and enabling the use of scalable, competitive technologies. Similarly, facilitating the further development and incorporation of cloud technologies, machine learning, and artificial intelligence into financial services is important to realizing the potential these technologies can provide for financial services and the broader economy.
Aligning the Regulatory Framework to Promote Innovation
Many statutes and regulations addressing the financial sector date back decades. As a result, the financial regulatory framework is not always optimally suited to address new business models and products that continue to evolve in financial services. This has the potential negative consequence of limiting innovation that might benefit consumers and small businesses. Financial regulation should be modernized to more appropriately address the evolving characteristics of financial services of today and in the future.