Garnet Capital Advisors Blog

It's no secret that financial technology, or fintech, is the next big trend in the financial services industry. From peer-to-peer lending to roboadvisors, new technology is coming out almost daily in an attempt to revolutionize the current status quo.

While this has created new opportunities for both consumers and financial institutions, it has had another side effect - regulatory issues. Governing bodies are having a hard time keeping up with the wealth of new fintech startups out there.

Fintech boom continues forward
The popularity of fintech companies is apparent all across the industry. Recently, a number of startups got their chance to debut their new products and services at the Fintech Demo Day, as reported by American Banker.

Maria Gotsch, co-founder of the FinTech Innovation Lab, told American Banker that fintech is now one of the hottest areas in the financial services industry. She further explained that investment in fintech startups is on the way up - from $1.6 billion in 2010 to $9.9 billion in 2014. 

This level of growth isn't just attributable to startups, though. Many established banks are getting in on the action by developing their own fintech divisions. The goal is to get ahead of the curve, instead of getting passed by this new technology. This combination has ensured that the fintech trend is far from this year's fad.

OCC has to adapt to fintech firms
While the growth of fintech isn't exactly a surprise, it has brought along an unexpected consequence. The Office of the Comptroller of the Currency recently announced that it has established a new group to monitor these technological trends, in an effort to better help the agency oversee the industry.

Comptroller Thomas Curry told American Banker that the group will be composed of roughly 10 people, who will watch over the fintech segment and offer recommendations on how to improve oversight. 

"We're comprised of hard-nosed examiners, economists and lawyers here at the OCC," he told American Banker. "Culturally, the tendency is to say no rather than maybe and yes. The idea would be to get knowledgeable people together to get a greater understanding of the changes that are occurring ... and with that understanding be able to evaluate it on a quicker turnaround. Left to our normal processes, we would not be that nimble."

Ideally, this change from the OCC will be beneficial for all those involved. Regulation is currently one area lagging behind in many fintech firms, and the OCC hopes to address that issue. It can be a good thing for fintech as well, as noted by Karen Shaw Petrou, managing partner with Federal Financial Analytics.

"Clearly Tom Curry wants to position the OCC as the go-to regulator for innovative concepts," she told American Banker. "He is signaling a lot of openness to them as long as certain controls are in place."

Right now, fintech is evolving so rapidly that it is creating problems for regulators. If agencies like the OCC can get out in front of the trend, they may be able to implement effective and realistic regulations, instead of acting in a reactionary manner.

Should you have any questions or concerns about banking and fintech, reach out to loan sale advisory firm Garnet Capital Advisors for guidance.