Lael Brainard, a member of the Federal Reserve's Board of Governors, thinks that traditional lenders need to demand that online financial companies protect consumer privacy and money interests, according to a Reuters news report.
“Banks have considerable influence,” Brainard said in prepared remarks at a FinTech conference at the University of Michigan. “Banks have a stake in ensuring that their vendors and third-party service providers act appropriately, that consumers are protected and treated fairly, and that the banks’ reputations aren’t exposed to unnecessary risk.”
The Federal Reserve has broad authority to police the banking industry, and Brainard said technology has given clients more financial options. She added that lenders need to ensure that customer privacy is sacrosanct.
Earlier this month, the Federal Reserve’s new vice chairman for supervision said the agency will take a closer look at the potential disruptions posed by FinTech firms.
“History has shown us that it’s not just a question of where has the risk that we knew moved, but what new risks are developing?” said Randal Quarles, Federal Reserve Board member and vice chair for bank supervision. “I think that in the regulated area … we ought to be looking at the implications of the growth of FinTech … I think we ought to be looking at cyber[security], obviously.”
Those comments came a few weeks after the president of the Federal Reserve Bank of St. Louis, James Bullard, warned that banking regulators in the U.S. need to pick up the pace in their efforts to confront the risks that FinTech companies pose to the banking sector.
“We need to speed up our consideration of the FinTech issues and think harder about what is the regulatory environment that is going to be appropriate,” Bullard said. “I think we have been complacent so far. That is the battleground for the next 10 years. It is not the same as the battleground for the previous 10 years.”