It’s nearly impossible to read through a business section without finding articles about the latest revelation in financial technology, and the last few weeks are no exception. Fintech seems to shine a bright beam of entrepreneurship and adventure that resonates across multiple audiences including bankers, investors, merchants, government agencies and legislators as well as consumers. Here’s a sampling of recent items.
The biggest splash in the pool is not about disruptive payments or mobile processing as one might expect — though those subjects remain timely — but about the regulation of alternative lending (e.g. LendingClub, OnDeck, Fundation or Kabbage), a fintech that continues to challenge traditional banking channels.
Government Regulation of Fintech Lending
A huge concern is the snail’s pace reaction time of big government to an industry that spins donuts around it. “The government is simply not built for the dynamics of fintech,” wrote Caitlin Klevorick and Zachary Townsend in a TechCrunch article entitled “Financial technology matures as government steps in.”
The writers also expressed concern that government is “continuing a status quo that discourages innovation in some areas that could benefit the underserved.”
Tara Jeffries wrote a compelling overview of the regulation dilemma affecting fintech in Morning Consult on August 3. Regulation is needed, but sometimes it is mandated at the expense of innovation.
“The industry sits in a murky regulatory zone, particularly among firms that are unaffiliated with banks,” she stated. “Those firms are subject to some regulations, depending on what kinds of services they offer and where they are located, but the regulatory structure has stumped some companies because they don’t know where they fit.”
Relevant regulators include the Office of the Comptroller of the Currency, the Consumer Finance Protection Board and the Treasury Department.
Jeffries said Fintech companies with bank partnerships are subject to traditional banking regulations. “Several firms in the industry have pushed for a banking charter from the Office of the Comptroller of the Currency” which might “clarify where the industry fits in the regulatory realm.”
Startupbootcamp was “founded in 2010 with the core idea of supporting the world’s best entrepreneurs.” The Copenhagen organization now has worldwide reach including Startupbootcamp FinTech, the “leading accelerator focused on financial innovation.”
The org provides “funding, mentorship, office space in the heart of Manhattan and access to a global network of corporate partners, mentors, investors and VCs for up to 10 selected Fintech startups across the globe.”
Squaring Up Mobile Processing
The Square business model has been an enigma to many financial analysts. Some believe the company will find greater stability after it is purchased by a large commercial bank. Square is currently trying to find the sweet spot between growth investment and profitability before its template is duplicated by a competitor capable of reaching a greater number of merchants with improved mobile processing and better pricing.
On August 2, Square posted a loss of 8 cents per share after the second fiscal quarter, a figure that was slightly below what analysts expected. With a stroke of Wall Street rationale, the market reacted to the lukewarm report with an overnight gain of 17%.
Stay tuned for future fintech reports in the coming months. In the meantime, you are invited to browse Constant Processing’s products and services page with links drilling down to solutions such as ProcessNow Mobile, an exclusive device providing mobile processing at the industry’s most competitive rates.