Financial Technology

TechNet supports private sector efforts to empower consumers to better manage their financial lives and enjoy new, safe, secure, inclusive, and reliable financial tools.  Congress and federal agencies should update outdated laws and rules in order to utilize modern financial technologies and meet consumer and business demand for innovative financial products.  Overall, the federal regulatory environment must be more amenable to emerging fintech innovations.  As the fintech sector grows, regulated industries are making greater use of technology service providers, which has led to some agencies attempting to expand their regulatory oversight and creates the potential for onerous and redundant compliance burdens that stifle innovation by technology companies.

TechNet supports the following:

Globally Harmonized, Principles-Based, Risk Based, Standards-Based Approach to Third-Party Risk Management and Oversight of Technology Service Providers

When agencies pursue third-party risk management rules that would apply to technology service providers, the approach should be principles-based, risk-based, and based on global standards with the goal of global alignment.

• Where critical sector regulatory agencies pursue oversight of third-party service providers, the approach should be principles-based, risk-based, and mapped to the global standards, such as ISO and NIST.
• Efforts to extend third-party risk management expectations to technology service providers should endeavor to balance effective risk management with encouraging innovation.
• Any third-party risk management regime should be developed with the intent to globally harmonize rules and align compliance expectations.
• Prudential banking regulators should continue to modernize outdated regulations that restrict third parties’ ability to connect consumers’ deposits and financial institutions.
• Where possible, sector-specific agencies should integrate existing third-party validations and certifications into oversight, assessment, and audit of third-parties. Where possible, this should include leveraging existing cost-effective, standardized approaches like the Federal Risk and Authorization Management Program (FedRAMP).

Consumer-Authorized Data Access

• Promote financial data use regulations that allow for innovation and consumer choice, including:
  • Promoting reasonable regulation of data brokers without overly restrictive rules on innovative uses of consumer financial data.
  • Ensuring data use regulation is tech-neutral and business-model agnostic.
• Support the implementation of an open finance regulatory regime through a Section 1033 rulemaking that:
  • Establishes a robust consumer data right that promotes the free flow of consumer-authorized data across the financial ecosystem allowing consumers broader access to financial services and control over their financial data.
  • Looks to industry-developed interoperability, portability, and security standards for ensuring a seamless, standardized, and secure experience for responsibly sharing consumer data.
  • Provides a flexible, consent-based framework for notifying consumers of how their information will be shared, transmitted, stored, and utilized; and
  • Clarifies ambiguities around liability for unauthorized access, privacy, credit reporting, and data accuracy that provides clear rules of the road for consumers and ecosystem participants.

Chartering Alternatives for Fintechs

• Promote regulatory and legislative efforts to encourage fintechs to be able to expand their service offerings through risk-based regulatory regimes that embrace competition and innovation together with systemic and consumer protections.

Financing Reforms

• Streamline rules for the online lending marketplace.
  • Policymakers should promote industry best practices that protect consumers and small businesses while maximizing diversity and innovation in lending services.

 Financial Empowerment

• Unlock the power of financial apps. Policymakers should empower consumers and businesses to take advantage of financial applications that help them improve security, convenience, and reliability.
• Leverage technology to reduce barriers to financial services, particularly for the unbanked and under-banked. The internet, cloud computing, blockchain, and mobile innovations should be empowered to thrive in an open environment with reasonable regulatory burdens, which requires a reassessment of existing barriers to adoption along with incentives to pursue the use of innovations that promote access to financing for individuals and small businesses.
• Promote policies for usage of open, multi-cloud solutions that allow easy portability and movement of workloads across any cloud provider.

Payment Systems Principles

• Promote enhanced security and convenience through continuous innovation. No one technology should be mandated for security and authentication, nor should one technology become a de facto mandate through “floor-setting.”  New rules should not deter technological innovations in payment systems.
• Promote new entrants and empower consumers to utilize a broad array of financial technology products and solutions.
• Reduce fraud in the financial industry through the empowerment of innovators and innovation, stop regulatory and legislative efforts that would force tech transfers of payments technology, and advance strong customer authentication principles that allow multi-factor authentication to reduce online fraud.
• Legislative and regulatory policies impacting electronic payments should promote continued innovation and support free markets, not regulatory mandates or price controls that fail to set a level-playing field for the entire payment and FinTech ecosystem.
• Promote the development of faster and more efficient financial services, including stablecoins that provide secure, deposit-like protections for consumers, as well as automation to improve efficiencies, including using AI and machine learning, and automated data workloads and data sharing to facilitate faster analysis.
• Provide regulatory clarity for Earned Wage Access (EWA), a key area of innovation that offers consumers greater flexibility. The Consumer Financial Protection Bureau should engage with industry to ensure ongoing responsible development and availability of a range of EWA products that can serve different consumer needs and uses.

Blockchain and Fintech Modernization

• The U.S. government should adopt a coordinated approach to blockchain technology and position the United States as a global leader in blockchain innovation.
• The U.S. government should adopt policies that safely facilitate and encourage the adoption of emerging technologies, such as blockchain, and create beneficial partnerships between financial institutions and fintech companies that improve consumer access, choice, and opportunity.
• Policymakers should promote digital asset literacy, ensuring that consumers understand the risks and benefits of digital asset technologies, including blockchain.
• Policymakers should provide clarity and regulatory certainty for business platforms build around digital assets and blockchain technologies, promoting a predictable legal environment while also ensuring that businesses are able to comply with Anti-Money Laundering (AML), Countering the Finance of Terrorism (CFT), and Know Your Customer (KYC) regulations. Compliance burdens should balance law enforcement objectives and support more advanced fraud and financial crime detection, surveillance, and mitigation methods, while utilizing and exploiting the benefits of blockchain technology analytics.
• Policymakers and regulators should advance clear tax treatment, auditing, and accounting standards for digital assets to enable appropriate compliance with regulatory requirements and provide clear guardrails for innovators.
• Policymakers ensure that developing blockchain regulations remain technology neutral, allowing for innovation in both proof of work and proof of stake models.

Federal Financial Regulator Office of Innovation

• TechNet supports efforts that will enable each of the innovation offices of financial regulators to foster innovation among the entities they regulate. TechNet encourages these offices to promote regulatory clarity for digital assets and ensure that agency rules and guidance keep pace with marketplace innovation.
• TechNet supports the creation of regulatory sandboxes to encourage innovation and operate as an educational channel for agency staff to become acquainted with emerging technologies, operations, and industry subject matter experts.