Trump’s Plan for US Fintech

By David Martinez - Community Partner - Newark, NJ & FinTech Connector Member

So, what is the US government’s position on the emergence of fintech, anyway?

We must first begin with our Principles

During the tumultuous “first 100 days” of President Trump’s administration, a record 32 executive orders (EO) were signed, sealed and delivered. His eighth — Executive Order 13772 titled “Core Principles for Regulating the United States Financial System — outlined the administration’s “Core Principles” of regulation, sought to examine the current financial regulatory landscape and identify existing laws, regulations, government policies and processes that enable (and inhibit) these principles into effect.

In response to the EO, the US Department of the Treasury, released a series of four reports that encompass a variety of institutions and services. For the purposes of this article, I will focus on the fourth and final report — “A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation”. Before we do though, let’s take a quick look at those “Core Principles” the report is designed to follow. Here they are:

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Now that we’ve become familiar with the administration’s Core Principles, we can begin to examine Treasury’s findings and recommendations. It is important to note, the report was constructed with insights from a wide array of stakeholders including experts and companies focused on data aggregation, lending, payments, and innovation.

Crisis leads to Opportunity

Starting with it’s ‘why’, Treasury describes what has become increasingly obvious to many — nonbank financial firms are playing a critical role in providing financial services to a large number of US consumers, particularly in capital markets, financial advice, execution services e.g. payments, and a myriad of other services. This shift in market share from banks to nonbanks is a direct result of the financial crisis of 2008. Banks, under the weight and stress of arduous regulations and a bevy of additional capital requirements, made certain traditional bank products unprofitable therefore allowing nonbanks to emerge, fill the gap in services and meet market demands. One really interesting example of this, the report cites:

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Emerging Trends

Treasury asserts financial services are being significantly shaped by 3 emerging trends:

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Summary of Issues and Recommendations

In assessing their proposed recommendations, Treasury identified key measures that could, in their estimation, promote economic growth, maintain strong consumer protections, and safeguard the financial system. Treasury believes it has identified opportunities that would support and accelerate the above-stated emerging trends and do so in a manner consistent with the Core Principles. Below are key themes and their findings:

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Bright Future Ahead

The reality is the United States is the global leader in financial services and innovation, so, unsurprisingly Treasury is quite bullish not only on emerging financial technology itself but the nation’s capability to adapt, adopt, and capitalize. The Trump Administration believes it’s policies are designed to “maintain and enhance America’s competitive edge and open business environment.”. Prudently though, Treasury warns that US regulators must stay abreast of developments in technology, to be more agile in fulfilling their responsibilities, and enable rather than hinder responsible growth through responsible innovation.