Rep. Patrick McHenry (R-NC) introduced a bill last week (Sept. 22) designed to help encourage financial technology innovation in the U.S.
We’ll be watching debate over this bill as it progresses, but we hope it opens up a dialogue about the best way to balance the need for regulatory oversight to protect consumers with the need to develop new products and services that meet rapidly changing demands.
The bill, known as the Financial Services Innovation Act (H.R. 6118), would establish what McHenry called a “regulatory framework” that would help fintech companies increase their speed to market. Twelve regulatory agencies would be required to establish what the bill calls Financial Services Innovation Offices (FSIOs). Companies could apply to those offices to receive “alternative compliance plans” – agreements under which regulations would be waived or modified – for their product or service.
In a statement on his web site, McHenry said, “Rather than the command-and-control structure of the past, my bill establishes an evolved regulatory framework that encourages financial innovation, all while maintaining our regulators’ commitment to the safety of consumers and our financial markets.”
As PaymentFacilitator.com has reported before, there is a natural tension as the federal government attempts to figure out exactly how to execute oversight over innovation in financial products and services, where there is very real potential for abuses, without stifling new ideas.
Indeed, the bill appears to be a response to concerns that the U.S. is falling behind in fintech innovation. Other countries are testing ways to manage the same conflicting needs for oversight and speed to market. The U.K. has received significant attention over the past year for its Financial Conduct Authority’s “regulatory sandbox,” which provides space for companies to test their innovations in a limited way before having to comply with regulations. The sandbox launched in May.
As new as the U.K.’s sandbox is, it’s too early to tell whether regulators there have managed to strike the appropriate balance between a safe space for innovation and the need to protect consumers.
Rep. McHenry introduced the bill at the Electronic Transactions Association’s 2016 Fintech Policy Forum last week.
In a statement, the ETA said, “ETA applauds the leadership of Congressman Patrick McHenry and House Majority Leader Kevin McCarthy for introducing HR 6188, the Financial Services Innovation Act of 2016, which will establish a regulatory framework that supports FinTech growth and innovation.”