The steady drumbeat of legislation and regulation echoes through federal buildings in Washington, D.C. and through state capitols across the country.
Payments represent an ecosystem, she said, a whirling interplay of complexity and nuance. The complexity affects all parts of the equation. Policymakers have a challenging role in helping shape guidelines that won’t stifle competition. The companies themselves must balance security and privacy requirements with usability. Consumers, of course, want things to be easy and fast and are not all that concerned about the intricacies that happen behind the scenes.
“A lot of FinTechs came into the market,” Ford said, “and thought, ‘I’m putting something out there, and I’ve got a financial institution on either ‘end’ … so I don’t need to think as much about compliance, because the FIs are regulated and are already thinking about compliance.”
But now, she said, there’s a growing recognition on the part of these digital upstarts that they need compliance and legal functions, whether in-house or outsourced. They need to think about risk differently, recalibrating their approaches to fraud prevention and data security, artificial intelligence (AI), junk fees and even faster payments.
If they don’t, these FinTechs may find that their go-to-market and partnership options are limited.
“There are many FIs that will not entertain any type of partnership with a FinTech if they do not have any type of assurance that there is someone looking at risk and compliance and can be flexible as the environment changes,” said Ford.
And the environment is changing as policymakers seek to get their arms around the seismic shifts in money movement and the fact that consumers have, and want, more control over their data than ever.
Commerce, she said, rests on top of complex infrastructures. “And there’s a complex web of companies that are working together to make the process fast and frictionless for the consumer. Educating policymakers to understand all of this can be challenging,” Ford noted.
By and large, lawmakers and regulators are proving that they want input from the industry itself and have shown a willingness to learn about the intricacies of different business models.
Ford observed that at the federal level, Congress has had some headwinds in terms of coming together to craft comprehensive risk frameworks. But regulatory agencies, including the Consumer Financial Protection Bureau (CFPB), have been weighing in with new proposals tied to open banking and how data is mined, collected and used.
At the state level, she added, there has been a groundswell in states such as California, which has been regulating data privacy and access.
For the companies that are being overseen, she said, the new laws “create some uncertainty — and things are hard to predict.” Setting budgets for the years ahead, especially in a bid to commercialize new products and services while anticipating what legal considerations might be, can seem a daunting task.
Ford said that for providers such as Fiserv, which are focused on innovating and offering technology solutions to banks and a range of other clients, enabling merchants to accept payments, and operating two debit networks, policy considerations are not as “clean” as they might otherwise be if the company operated in a clearly-defined niche.
“Even though we are not a financial institution,” she said, “we are a significant service provider, and we are regulated in much the same ways as financial institutions.” In that light, the company has expectations about clients’ risk management and security protocols and how those clients’ leadership and governing boards work with those protocols, Ford said.
She told Webster, “If you’re a FinTech, you could conceivably get into our secure marketplace and then FIs could choose to do business with you. Our APIs make connections easier, and behind our APIs and developer tools there’s a lot of work to make sure that we are not introducing vulnerabilities into the ecosystem.” Fiserv, she said, also has the lobbying and policy expertise to help counsel client firms who may not have the government relations or in-house resources on hand to make sense of what the shifting sands of financial services legislation mean.
“We’re trying to protect consumers, but we are trying to protect financial institutions and businesses as well,” said Ford, who added that a successful approach to regulation, on all sides, from the private sector and from policymakers, “requires communication and collaboration.”