Harmonizing State Regulation for Fintech

From American Banker (subscription required):

“Faced with the prospect of a new federal fintech charter, state agencies are considering drastic steps to streamline regulation across state lines. A handful of regulators are discussing ways to create a single regulatory structure for fintech companies that are seeking regional or national business.

“‘Our goal is uniformity across the United States,’ said Bryan Schneider, the head of Illlinois’ financial regulator and chairman of a multistate regulatory task force focused on fintech. ‘It’s not exactly creating a new license type or creating a new charter. But it’s harmonizing the regulatory requirements while still recognizing the sovereignty of the individual state.’”

Harmonizing state regulation of fintech is at the heart of CSBS’ Vision 2020, a series of initiatives to modernize financial regulation of non-banks and fintech in general. Better aligning multi-state licensing, examination and supervision are elements of this harmonization approach.

To this end, state regulators have committed to moving towards a 50-state licensing and supervisory system…have been meeting with fintech representatives to understand which regulatory practices can be improved without sacrificing safety and soundness or consumer protection…and have begun building technology platforms to streamline – on a nationwide basis — the many steps involved in licensing and examining financial companies.

In the article, Schneider discusses how nationwide harmonization might begin with a subset of states…that accepting licensing approvals from other states does not mean giving up jurisdiction – “Just because I approve [certain companies] in Illinois, doesn’t mean that they have free range of actions in Illinois” – and designating a lead state for examination would further simplify the multi-state regulatory experience.