Some of the biggest names in fintech — including Plaid, Varo and LendingClub — are joining forces to raise their industry’s profile among lawmakers.
These companies and dozens of others have formed two national fintech advocacy groups based in Washington — the Financial Technology Association and the American Fintech Council — that launched within a week of each other this month.
Their goals overlap: Both say they will lobby for fair and equitable access to financial services and push for responsible innovation and business models.
Other tasks on one or both of their agendas include modernizing financial regulation, forging bank-fintech partnerships and bringing affordable lending and investment products to a diverse range of consumers.
Neither group tied the timing of its launch to the pandemic, but the FTA in particular points out that the timing is fitting as the pandemic has widened income and wealth inequality in the United States and caused financial havoc for both individuals and small businesses. Fintechs say they can help solve some of these problems with technology that more fairly assesses credit risk than traditional lenders and with marketing efforts that center on the underserved.
Their formation also points to the maturation of the fintech industry, and the potential for future partnerships — and perhaps increased competition — with banks as their influence grows.
“Fintech is no longer in an early-stage startup phase,” said Daniel Gorfine, senior policy adviser at the FTA. “Fintech is providing mainstream financial services.”
The Financial Technology Association is a trade organization that announced its first 11 members on March 10.
The buy-now-pay-later business Afterpay, the robo adviser Betterment, the small-business banking provider Brex, the card issuer Marqeta and the data network Plaid all joined the FTA.
“The Financial Technology Association is the more interesting one to me as that’s really the formation of a more classic traditional lobbying group for an industry,” said Gilles Ubaghs, senior analyst at Aite Group.
He notes that most lobbying efforts have been dominated by existing legacy vendors or large-scale banks. “Some of the founding partners are pretty significant in scale and valuation, so as they grow, their lobbying clout will only increase,” he said.
FTA firms must adhere to the core principles outlined on its website, which include transparency in fees, clear privacy disclosures, strict safeguards when it comes to data and fair access to financial services.
The group also has outlined five policy tracks in its introductory white paper: to modernize financial regulatory frameworks, such as by creating a national banking charter that would allow fintech firms to join the banking system; devise dual federal and state-based regulatory models for fintechs; nurture partnerships between fintechs and financial institutions; leverage the ability of fintechs to foster financial literacy and open investment opportunities to all income levels; and encourage innovation within regulation and compliance, such as by expanding regulatory sandboxes and no-action letter programs.
“The concept and driver of the organization is, how do you support the further positive development of fintech, subject to appropriate regulatory guardrails?” said Gorfine.
The American Fintech Council, which debuted on March 3, is the result of
AFC members include the lenders Affirm, LendingClub, Prosper and Upstart; the three credit bureaus, Equifax, Experian and TransUnion; and the challenger banks Green Dot, One and Varo. They all must cap loans at an annual percentage rate of 36%, follow the Small Business Borrowers’ Bill of Rights from the Responsible Business Lending Coalition and demonstrate transparency in products and fees.
This group’s agenda stems from its two predecessor organizations and include support for regulations that prevent discrimination in algorithms, a bill that would provide debt relief for people hit hard by the pandemic, and, notably, advancing open banking.
“The priorities of the American Fintech Council are going to expand greatly beyond lending to other areas as we bring on more members,” said Armen Meyer, vice president for public policy at LendingClub, a founding member of the Marketplace Lending Association. “Open banking will be a priority of ours so consumers can have control over their own data and share it with who they want to.”
The Arizona Fintech Council
Both the American Fintech Council and the FTA say they will support bank-fintech partnerships; Meyer notes the council’s members have partnered with banks many times in the past, such as by selling loans to them.
The two organizations also expect to collaborate on common goals.
“The Financial Technology Association is very supportive of the American Fintech Council launch,” said Gorfine. “It’s a positive mark to have a number of mature and thoughtful voices in the space.”
