FinTech firms such as OnDeck Capital Inc. & Kabbage Inc., are stirring up the American financial system, this worries the US Federal Reserve Bank, which is hesitant to hand them the reign of the nation’s financial infrastructure, and in doing so, the central bank is putting itself at odds with other financial regulators. Furthermore, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) are currently exploring situations and implications a federal license grant to these FinTech firms, which offer financial services, such as fund transfers and loan, can have. The plan is part of the Trump administration’s portfolio to aid small businesses and have more jobs for the youths. With federal license grant, FinTech firms which are currently functioning within the purview of patchy state rules, will further try to expand their presence into the nation and abroad, with new services and products. Also, with a federal license grant, these FinTechs can drastically reduce their regulatory costs, which will further boost their revenues.
Eventually, without the access to nation’s financial infrastructure, which includes the payment system, settlement services, and other federal tools, these firms are literally tied up and are hesitating on nationwide expansion investment. The Federal Reserve Bank which holds the card for their inlet has not yet made a decision on whether to let them in. From Fed officials’ point of view, these firms lack the basic features banks have, such as robust risk-management controls and consumer protections.
According to St. Louis Fed President James Bullard, the FinTechs only want the access to the financial infrastructure but are reluctant on the regulation that comes with it.