Projected Changes In FinTech Regulations
It is no secret that fintech companies have enormously eased the way consumers transact financial products and services. With the emergence of fintech start-ups offering services such as electronic payments, money transfers, bitcoin blockchain, and virtual currencies, fintech has successfully taken away the monopoly of monetary services from traditional banking. Moreover, long-established financial institutions are also investing in the new innovative technology.
It is also an important driving force of the US economy as 7.5% of the total GDP for 2017 (amounting to $1.45 trillion) comes from the financial market. As fintech continues to revolutionize the country’s financial sector at a rapid rate, the need for efficient rules and regulations around this industry becomes more urgent.
Better Licensing Procedures
Reports say that USA constitutes more than half (57%) of the fintech industry worldwide, making the country a top player in this field. However, banking and finance analysts deem USA to be behind other countries when it comes to providing a systematic legal framework to guide fintech businesses.
The current policy which requires fintech firms to adhere to a set of regulations of various states is one of the challenges that fintech companies is facing in US. This method makes complying with licensing requirements a long and complex process. To remove this burden and streamline the processes, there is a proposal to adapt a standard licensing procedure to be recognized by all 50 States. The States of Massachusetts, Tennessee, Texas, Illinois, Washington, Kansas, and Georgia recently announced their support to the said proposal. This policy is still under negotiation as state regulators work out some issues with other agencies.
Arizona’s Fintech Sandbox Program
Although already being practiced in countries like Singapore, Canada, and United Kingdom, Arizona is the first state in America to pass a bill to implement a sandbox program for fintech ventures. Arizona’s regulatory sandbox policy that aims to encourage the development of new technology in the finance sector was signed on March, 2018.
This policy will allow firms to test their fintech products for up to two years and serve 10,000 customers without the need for a formal license. The sandbox program for fintech is set to take effect before year 2018 ends and will be available until July 2028. Local officials in Arizona are hoping that the new legislation will stimulate business growth and will promote advancements in the fintech industries such as blockchain and cryptocurrency. Arizona’s move may also inspire other States to implement new legislations that will take advantage of the emerging markets in the fintech industry.
Tighter Cybersecurity Measures
The blockchain technology of fintech companies made partnerships and transactions from multiple industries feasible. Nevertheless the growing presence of third-party providers in monetary processes also raises many concerns in privacy and security. This issue prompts the Financial Crimes Enforcement Network to enforce the Customer Due Diligence Requirements (CDD rule) which took effect on May 2018. The new policy lays out a set of guidelines that financial establishments need to comply with in order to display transparency and prevent illegal activities.
The future of the fintech industry sure looks bright but companies that wish to seize the opportunities should anticipate changes in regulatory requirements that can benefit or harm their operations. The sure thing is that new policies will require 100% compliance so it is best to be on the lookout for the projected changes in the fintech industry.
Mobile Payments Conference 2018
If your business revolves around fintech, it’s best you know what regulations and restrictions are coming your way. Make sure to register for MPC 2018 to gain insight from industry leaders in all the latest fintech innovations and news.