Financial regulatory oversight in the United States is complex and fragmented, with different rules across multiple regulators at both the federal and state level. And, while this is true for all financial institutions, new entrants known as financial technology (fintech) firms noted additional difficulty identifying the applicable laws and how their activities will be regulated. Today’s WatchBlog explores our latest fintech report, particularly how the government oversees these products and services. Listen to our podcast, then read on for more. How do agencies regulate fintech? Fintech refers to the use of technology and innovation to provide financial products and services—including payments, lending, wealth management, and distributed ledger technology. We’ve looked at benefits, risks, and protections for fintech users. And when it comes to oversight, fintech firms—often technology companies that aren’t financial firms—are regulated based on the types of activities they conduct. For example:
- Robo-advisers (firms offering low cost investment advice provided solely by algorithms instead of people) are generally subject to the same federal oversight as traditional investment advisers.
- Fintech firms that partner with banks and credit unions may be subject to indirect or limited federal oversight.
- Some fintech firms may be subject to routine oversight by the Consumer Financial Protection Bureau, and Treasury’s Financial Crimes Enforcement Network (FinCEN) has authority to examine any fintech firms conducting money transmission.
- Some fintech firms, such as certain payments providers, may not be subject to federal financial oversight if they do not meet the definition of a regulated business.