US Treasury Promotes Bank-FinTech Partnerships
The US Treasury Department is to release a report on Wednesday (November 16) encouraging cooperation between banks and FinTech, provided it is done responsibly.
That’s according to a report from Reuters, which spoke to an unnamed finance minister before the document’s release.
This official said that while there may be regulatory gaps in the relationship between banks and financial technology companies, these partnerships have provided products designed for specific communities that traditional financial institutions had not targeted.
Regulators can promote competition and protect consumers largely with existing authorities, Treasury Secretary Janet Yellen said in a statement to Reuters. PYMNTS contacted the Treasury for comment.
The report comes two months after Acting Comptroller of the Currency Michael J. Hsu said the growing prominence of digital banking and FinTechs could trigger a financial crisis. He said FinTech companies’ encroachment into the traditional financial sector, including via bank partnerships, had led to increased complexity and “de-integration” in banking.
“My strong feeling is that this process, left to its own devices, is likely to accelerate and expand until it is a serious problem, or even a crisis,” Hsu told an audience at the Clearing House and Bank Policy Institute’s annual conference in New York.
Last month, he modified his comments slightly, saying he wanted to make sure companies were monitoring their risks.
“Look, bank-FinTech partnerships, they’re here to stay,” Hsu said in the report. “I’m not trying to do away with them. This is the future, so let’s get the future right.”
Such team-ups are inevitable, Modern Treasury CEO and co-founder Dimitri Dadiomov and Silicon Valley Bank Head of Global Payments Kathleen Pierce-Gilmore told PYMNTS recently.
The two companies have worked together to help client businesses use tools that allow them to build seamless payment experiences.
Projects like these, Pierce-Gilmore and Dadiomov said, should help dispel the idea that there has to be a rivalry between banks and FinTechs.
“We bank our so-called competitors,” said Pierce Gilmore, “and actually more than 50% of FinTechs out there bank with SVB … and companies like Modern Treasury help make us better. There’s room for both of us.”
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