OCC Announcement To Have Transformative Impact on FinTech Industry
PJ Hoffman
On Friday, December 2, the OCC announced that it will issue special-purpose national bank charters to FinTech companies, published a whitepaper on the topic, and requested comment on the granting of special-purpose national bank charters. This much-anticipated development was met with enthusiasm from many in the FinTech community. The OCC’s decision to consider issuing charters to FinTech companies offers a number of public policy benefits for consumers and small business proprietors that are increasingly relying on these innovative products and services, but the devil is in the details.
ETA’s members embody the concept of FinTech. ETA members include new participants as well as traditional players. Both are utilizing FinTech to deploy new products and services as well as make existing products and services less expensive and more broadly available. On January 17, ETA submitted a comment letter in support of the OCC’s announcement that it will consider applications for special purpose national bank charters from FinTech companies and recommends that the OCC adopt a flexible and collaborative approach to the design of a charter application and evaluation process that works for FinTech applicants while satisfying the OCC’s regulatory expectations. Because FinTech companies come in all shapes and sizes with a varying degree of products offered, it is imperative that the OCC take a case-by-case approach when reviewing applications to account for the differences between traditional banks and FinTech companies. That flexibility allows FinTech companies room to innovate and provide the best products and services for consumers.
Another public policy benefit is that a FinTech company that obtains a bank charter will have the benefit of a regular and consistent regulatory framework in which to provide services to customers. This type of clarity benefits everyone by ensuring that industry, customers, and regulators are operating from the same rules and expectations. The OCC’s decision to consider issuing charters to FinTech companies will also further industry’s existing efforts to expand consumer access to innovate and affordable financial products and services. ETA members are leading the way in using technology to address the financial needs of underserved consumers. A related benefit is that creating a national bank charter will increase competition in the market and allow ETA members to focus, to the greatest extent, on developing cost-efficient, inclusive products and services.
In order to make the proposed FinTech charter as attractive as possible, the OCC must work closely with other regulators to ensure a smooth application process for potential FinTech-chartered banks. Given the number of regulators that may have jurisdiction over a potential FinTech-chartered bank, it is imperative that regulators are on the same page to remove overlapping and inconsistent application of regulations.
It is exciting times for our FinTech members as the OCC’s proposed FinTech charter offers a number of potential public policy benefits, and those benefits are most likely to be realized if the program is tailored appropriately for the FinTech industry.
PJ Hoffman is Director of Regulatory Affairs at ETA. He can be reached at [email protected].