Banks lobby for tiger controls on fintech access to Fed payments system

Banks are lobbying the Federal Reserve to set strict parameters for fintechs that want access to services provided by the Fed, including its payments system. The Fed sought feedback on proposed guidelines for allowing fintechs with limited-purpose bank charters access to the Fed’s services.

Why should we care?
The Fed outlined six principles under which fintechs would be granted access to the Fed’s services, including things like being legally eligible under the Federal Reserve Act, ensuring they don’t present undue risk across the financial system, and not adversely affecting the Fed’s ability to implement monetary policy. While banks generally support the Fed’s direction, they argue it is too broad, and they say any company accessing Fed-provided services should be subject to the same regulatory standards as traditional financial institutions. In a joint letter, the American Bankers Association, the Consumer Bankers Association, and the National Association of Federally-Insured Credit Unions said they would like the Federal Reserve Board to “outline specific capital, liquidity, risk management and public reporting requirements necessary for master account access.” Fintechs, on the other hand, argue that the Fed should take steps to ensure eligible fintechs have access to the Fed payments system and other services, as is the case in other countries. “Under the current regulatory regime, payment companies rely on bank partners - often competitors - to access payment rails. That ultimately results in added costs to the customer and concentrates risk in a handful of the largest banks who process most payments,” money-transfer firm Wise said in a statement last fall.