REGULATION: It's opposite day in the United States: protect the banks, not the innovators

Here's an odd one. FDIC Chairman Jelena McWilliams attended the American Banker's Association conference and focused on how to simplify regulatory supervision in order to help banks compete with Fintechs. In a similar vein, US State regulators continue the legal fight against the OCC, a federal agency trying to allow tech companies -- mostly lenders and payments companies like Square and SoFi -- to have a special Fintech charter. Part of this grind is the alphabet soup of American regulators and inevitable conflict over jurisdiction. As an example, the SEC just launched a new hub for innovation and financial technology, much in response to the rise in digital assets. Still, a meaningful portion of the American regulatory apparatus is functioning to protect its banking coral reef from competition.

When you look at the spirit of regulation in Europe, much of its mission is actually to increase competition with banks, helping Fintechs and other innovative players take market share from incumbent national champions. PSD2, the major directive in this regard, is colloquially referred to as "Open Banking" -- quite the different mindset. The desired strategic outcome is that many incumbents will be low cost capital-providing utilities, and some players will be platforms or aggregators of tech, capital and user attention. Tech companies can back into these positions as well. If regulators instead protect the capital providers and hurt competition as a result, you will end up with disconnected tech infrastructure and a 20th century financial product-push economy. 


Source: MarketWatch (Cards), CNBC (Amazon Lending), Autonomous NEXT (Travelers), Statista, Amazon