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September 12, 2017

The U.S. GAO published a statement focusing on the subsectors and regulatory oversight in fintech. GAO, in April 2017, issued the first of a series of planned reports on the fintech industry that describes four commonly referenced subsectors of fintech and their regulatory oversight. This testimony summarizes the findings of that report and describes commonly referenced fintech subsectors; potential benefits and risks of these subsectors, including recent industry trends; and regulatory oversight of these subsectors. This statement is based on the April 2017 report on the fintech industry.

Fintech products and services offer various potential benefits, including increased access to financial services, lower costs, increased speed of service, and convenience. Fintech products and services also pose various potential risks, including data security and privacy risks, risks posed by the use of alternative data, risk of human error or confusion, and risk posed by incomplete or inaccurate data. Trends that have emerged across the fintech landscape include the creation of partnerships between traditional financial institutions and fintech firms, formation of hybrid services, and establishment of self-regulatory efforts.


Regulation of the commonly referenced subsectors depends on the extent to which the firms provide a regulated service and the format in which the services are provided, with responsibilities fragmented among multiple entities that have overlapping authorities. Federal oversight authorities that apply to regulated activities generally include risk management oversight related to services provided to federally regulated depository institutions, consumer protection oversight, and securities and derivatives markets oversight. Some agencies have taken a number of steps to understand and monitor the fintech industry. State licensing laws and oversight mechanisms, including consumer protection, vary by state. Officials from the Conference of State Bank Supervisors note that the states are working on developing tools that can facilitate compliance with state-by-state licensing mechanisms.


Related Links

GAO Statement (PDF)

Fintech Report, April 2017 (PDF)

Keywords: Americas, United States, Banking, Fintech, Regulatory Oversight, GAO

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