The impact of the COVID-19 crisis has brought economic disparities amongst Americans further to the forefront of our national discourse. During this time of economic hardship however, financial technology — or “fintech” — has shown tremendous promise to remedy many of these disparities and extend to all Americans greater control of their financial situation if given a proper regulatory environment.
As ranking member of the House Financial Services Committee’s Taskforce on Financial Technology, our focus over the past two years was designed around the impact that fintech has on policy issues ranging from lending, payments, data privacy, real-time payments, alternative data in credit scoring, and international perspectives on regulation. When laws and regulations are crafted and updated to reflect innovation in any sector of our economy, the American people are afforded greater choice, fairer prices, and far more control over their future. Americans deserve to access to technologies that can provide them a better life, but we must also ensure these innovations do not reinforce or even expand existing disparities.
During the 116th Congress, the Taskforce was comprised of members on both sides of the aisle interested in exploring the opportunities fintech presents. This culminated in a non-partisan effort to promote financial technologies promise not just to provide Americans with choice over their financial services, but also to reach the unbanked and underbanked in ways traditional financial institutions may have fallen short.
The Taskforce’s sequence of limited but important hearings sought to emphasize the opportunities that these technologies can provide to every American. One hearing on alternative data in credit scores uncovered both that this data holds the opportunity to give people a better future, and the need to ensure this data remains free from discrimination. Fintech lenders can use alternative data, free from bias, to serve borrowers who may otherwise not be given a leg up. This opportunity in turn has also shed a light on the necessity for existing financial institutions to adapt and expand to these unserved markets as well.
In addition to raising awareness of the potential that fintech holds for expanding access to financial services, it was my goal on the Taskforce to identify and modify areas of regulation that unintentionally inhibit responsible innovation. The hearings the Task Force hosted on regulation have made most salient the necessity for the United States to avoid taking a heavy-handed regulatory approach using arcane and outdated laws if we are to remain competitive and a leader in the global digital transformation.
While there are still regulatory obstacles on the horizon, fintech isn’t going anywhere. Our work focused on the need for Congress to better understand these topics and focus on policies that promote the financial success of all Americans rather than the advancement of any political agenda. Congress must continue to study and consider nonpartisan policies in this area.
The events of 2020, and now the first month of 2021, have made many of us feel that our financial future is uncertain; however, financial technology can help to ease this stress. Congress must continue to put technology in a place where it can thrive, where it can reach underserved communities, and where it can expand everyone’s access to financial services. In this new year, we must continue our work to craft a regulatory environment in which financial innovation can flourish, and the financial interests of the American people are put first.
Tom Emmer represents Minnesota’s 6th District and is ranking member of the House Financial Services Committee’s Taskforce on Financial Technology.