Dive Brief:
- President Donald Trump on Tuesday directed the Federal Reserve Board of Governors to review how it grants access to central bank payment rails, with a view toward allowing financial technology firms to use these Fed services.
- Trump’s executive order is aimed at reducing access barriers for fintechs by identifying regulations and other processes “to facilitate innovation and greater competition in the provision of financial services, while maintaining safety and soundness,” the White House wrote in a “fact sheet” accompanying the order.
- The American Bankers Association — which has urged caution on Fed rails access — said in a statement Tuesday that regulators should “conduct their requested review in a way that allows for innovation but doesn’t compromise the safe and sound financial system we have today.”
Dive Insight:
In a Tuesday press release, Financial Technology Association CEO Penny Lee lauded the order as “a win for the millions of Americans who rely on fintech products every day to pay bills, manage their money, and access financial services.”
The order “represents significant momentum toward modernizing the U.S. payments system and reducing the cost of moving money for consumers and small businesses,” the FTA said in its press release.
Trump’s order comes as the House of Representatives is evaluating legislation introduced last month that would give fintechs access to the FedACH and FedNow payments rails.
That measure, the Payments Access and Consumer Efficiency (PACE) Act, was introduced by two California lawmakers, Rep. Young Kim, a Republican, and Democrat Rep. Sam Liccardo.
The Federal Reserve is seeking a “continuity of approach on payments licensing throughout the Fed,” Arkansas Republican Rep. French Hill, chairman of the House Financial Services Committee, said Wednesday at a fintech conference sponsored by news outlet Semafor and the FTA.
The House bill will begin “a good discussion” about “the need for perhaps a nationwide payment licensing regime, rather than being reliant only on state-by-state money services license,” Hill said.
Federal Reserve Gov. Christopher Waller is leading a review of the issue and aims to prevent the dozen Fed regional banks from adopting disparate approaches on access for financial services firms, Hill said.
In its comments, the ABA said that “any player in the financial services marketplace looking to offer bank-like services should be required to meet the same rigorous regulatory and consumer protection requirements.”
Last year, Waller floated the idea of a “skinny” account, offering a brand of limited access to Fed rails, envisioned as best suited for fintechs. A subsequent December proposal was criticized by some fintechs and as too restrictive.
Speaking at the same Washington event as Hill, Comptroller of the Currency Jonathan Gould on Wednesday called Trump’s order “a long overdue reassessment” of Federal Reserve regulations.
The order requires the Fed to report its findings, options and recommendations within 120 days.
