On Monday (Feb. 6), Philadelphia Federal Reserve Bank President Patrick Harker said that increased regulatory oversight of the growing FinTech sector is necessary.
During his remarks at the Global Interdependence Center’s Payment Systems in the Internet Age conference, Harker focused on technology-based financial services companies that are not subject to most federal banking laws, for now, because they do not accept deposits from customers, Reuters noted.
“Regulation is not just a question of protecting consumers; it’s a question of protecting the innovators as well,” Harker said. “It’s in their best interest to have an established framework in which to operate.”
However, FinTechs remain fearful of innovation being stifled if, in fact, new rules and licensing requirements bring a new level of regulation to the space.
“It’s unlikely that increased oversight will be welcomed with open arms, but I should say now that it’s actually in the interest of FinTech firms,” Harker explained. “What FinTech outfits don’t want is regulation that comes in after a crisis.”
Harker took the stance that strengthening regulatory requirements now, rather than the inevitable future crisis or economic downturn, would stand to benefit both customers and the companies themselves by offering increased protections.
The statement comes at a time when President Donald Trump remains adamant about removing many regulations placed on financial firms after the financial crisis of 2008.
Despite taking a stance against Wall Street in the run-up to the election, Trump has now signaled a new, friendlier environment for Wall Street.
His new stance was applauded by the financial industry, as well as Republicans, who have long tried to get rid of Dodd-Frank and lower the regulatory costs that financial firms have to pay as a result of regulation. Democrats reacted negatively, calling Trump’s move shortsighted, noted a report by The Wall Street Journal. The paper noted that one of Trump’s plans calls on regulators to find costly rules and laws, such as Dodd-Frank, and another directive makes it possible for the retirement savings rule that took effect in April to be rolled back.
He also reiterated his position that Dodd-Frank needs to be dismantled, saying: “I have so many people, friends of mine, that had nice businesses. They can’t borrow money. They just can’t get any money because the banks just won’t let them borrow it because of the rules and regulations in Dodd-Frank.”