The US Department of the Treasury has called for more regulation on the partnerships between FinTech and banks to protect consumers.
According to Finextra, a new Treasury report detailed that as concentration among federally insured banking is growing, FinTech players are making a play in core consumer finance markets, which is contributing to competitive pressure.
While the established players are often key to the underlying infrastructure that supports the FinTech business models, there is a lot of interaction between the two camps – both as collaborators and competitors.
The report said, “Regulators should provide a clear and consistently applied supervisory framework for bank-fintech relationships. A bank-fintech relationship that delivers consumer financial services provided by an insured depository institution (IDI) must operate in compliance with the laws, regulations, and risk management standards applicable to the IDI.”
The report also said that watchdogs should ‘robustly’ supervise bank-FinTech lending relationships for compliance with consumer protection laws.
Regulators should also support innovations in consumer credit underwriting designed to increase credit visibility, reduce bias, and prudently expand credit to underserved consumers.
US Secretary of the Treasury Janet Yellen said, “While non-bank firms’ entrance into core consumer finance markets has increased competition and innovation, it has not come without additional risks to consumer protection and market integrity.
“This report lays out actions that would maintain fair, transparent, and competitive markets while encouraging responsible innovation that benefits consumers.”
The US Treasury Department recently revealed it is planning to advise the government to issue a digital dollar.
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