On January 13, 2017, a week before the change in Administration, the Obama White House issued a white paper entitled "A Framework for FinTech" ("White Paper"). The White Paper highlights various financial technology ("FinTech") initiatives that were taken by the previous Administration and lays out policy objectives and principles that the Obama White House thought should be considered by FinTech stakeholders in the government and the private sector.
The White Paper states that when working to grow FinTech—and financial services more broadly—the government and the private sector should focus on key policy objectives such as fostering innovation and entrepreneurship; promoting safe, affordable and fair access to capital; expanding financial inclusion; and identifying and mitigating potential systemic risks. In addition, the White Paper encourages regulators to develop their regulatory approach based on data-driven analysis and to design flexible and innovative regulatory tools. The White Paper cites the United Kingdom and Singapore as examples of countries that utilize innovative regulatory approaches to promote a globally competitive FinTech industry.
The White Paper also highlights a number of FinTech initiatives under the Obama Administration, including the Office of the Comptroller of the Currency's Responsible Innovation initiative1 and the Consumer Financial Protection Bureau's Project Catalyst,2 as examples of regulatory tools that encourage dialogue with industry participants.
In addition to identifying key policy objectives for FinTech, the White Paper sets forth ten principles for stakeholders to apply to the development and growth of FinTech. In particular, the White Paper encourages public and private stakeholders to:
- Think broadly about the financial ecosystem and consider how FinTech offerings affect the financial services landscape;
- Start with the consumer in mind and develop products and services that go beyond compliance with existing regulations and provide maximum value;
- Promote safe financial inclusion and financial health by increasing access to financial services in ways that improve consumers' overall financial health;
- Recognize and overcome potential technological bias by testing algorithms for systemic biases;
- Maximize transparency with both customers and regulators, and perform customer due diligence to identify potential illicit actors;
- Strive for interoperability and harmonized technical standards to reduce friction for consumers and promote best practices;
- Build cybersecurity, data security and privacy protections into FinTech offerings to safeguard individuals and the financial system;
- Increase the efficiency and effectiveness of the financial infrastructure by developing enterprise solutions and infrastructure innovations in addition to consumer-facing products and services;
- Protect financial stability by being forward-thinking about potential risks that FinTech could impose; and
- Continue and strengthen cross-sector engagement between incumbent financial institutions, new entrants and government authorities.
Notwithstanding this parting shot from the outgoing Administration, the Trump Administration could take a different regulatory approach toward FinTech. The new Administration has signaled an interest in working with leading technology companies, including many companies active in the FinTech space, but it remains to be seen what the Administration's priorities are and whether it will pursue policies that facilitate growth in the FinTech industry.
1 For recent developments with respect to the OCC's Responsible Innovation initiative, see our client alerts OCC Lays Out Responsible Innovation Framework and OCC Announces Special Purpose National Bank Charter for FinTech Companies.
2 For recent developments regarding Project Catalyst, see our client alert CFPB Makes FinTech Headlines.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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