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Regulators seem to be growing more cautious about banks and fintech businesses.

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Reuters on September 7 reported that banking regulators are concerned about the increasing partnerships between banks and fintech companies. They fear increasing financial risks due to these partnerships.

There are concerns these alliances can create a long-term crisis. These concerns were always there but now they are being voiced prominently. Bank regulators are concerned about these partnerships. The clearly defined borderlines of banks and fintech companies are getting blurred in many places. Regulators are finding it difficult to identify the entity responsible for a financial activity that involves these two parties.

Michael J. Hsu, the Acting Comptroller of the Currency, warned about fintech companies getting into traditional banking and financial sectors, especially through their associations with banks. According to him, it is creating problems for the regulators that are unable to distinguish the borderline between the banks and fintech companies. The problem will only worsen as both parties develop deeper associations in the coming years.

According to Hsu, there are risks of long-term financial troubles due to these partnerships. Big technology and fintech firms are getting more involved in the banking sector. He said more attention to these activities is needed. He voiced concern that this process if left to continue will only accelerate and at some point in time in the future create a crisis.

Tech firms have started offering technological and innovative solutions to banks. These solutions allow banks to offer seamless customer services. Both fintech companies and banks are coming together to improve banking and financial services. However, without proper regulations in place, these partnerships make it difficult to separate the bank’s identity from the fintech service provider in a banking transaction.

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