Delaware forum forecasts future of financial technology
WILMINGTON – The future of the financial technology – or “fintech” – industry will necessitate the streamlining of certain processes, more local accountability, and better coordination among states, said Margaret Liu, senior vice president and deputy general counsel at the Conference of State Bank Supervisors (CSBS).
Liu, who served as the keynote speaker during the third annual Delaware Fintech Forum, which was held virtually Dec. 8, said CSBS works as a “convener” and “force multiplier” by helping members harness technology platforms, data analytics and other tools to do their work more efficiently.
“We’re a forum and a platform for state regulators to come together, to work together collaboratively … but also to talk about risks and opportunities that they are seeing in the financial services sector in their regulated areas, and where they think that it’s necessary and constructive to come up with comprehensive and coordinated approaches to these things,” she said.
The workforce of today not only must be well-trained and well-educated in current fintech practices, but they must also be preparing for what the financial services market of tomorrow will look like, Liu said.
Part of that future will involve companies improving their efficiency by states coordinating better with one another, Liu said.
CSBS has about 53 member organizations from “different states with different philosophies, different perspectives,” Liu said. But she said those organizations from across the country are able to collaborate and learn from one another while retaining control over their state’s systems.
“No one’s giving up their sovereignty. But what they are doing is trying to make good use of everybody’s work,” she said.
CSBS owns and operates the Nationwide Multistate Licensing System (NMLS), which already enables mortgage lenders, money transmitters, consumer finance services providers, and other companies to get licensed in one state or in 50 states through a common platform.
In 2021, CSBS and its state partners will roll out the “One Company, One Exam” initiative, which will allow money transmitters operating in 40 or more states to be subject to only one exam.
“That doesn’t mean only one state is looking at them, but it means it is an intentionally coordinated and unified exam process,” Liu said.
She added that the exams help regulators ensure that companies are operating responsibly, are financially sound, and are taking care of their consumers.
“One Company, One Exam” will include a technology platform where companies and examiners can interact, share documents, review materials, and make requests all in one place, Liu said.
Congress will probably be focused on the coronavirus pandemic for a while, Liu said, but she expects to see more legislation related to licensing over the next several years.
“One area that affects financial services that I think that we’ll see as a multi-year trend is looking at some of the details of state licensing laws as they relate to physical presence in the office,” she said. “There’s been a lot of talk in the mortgage industry and with some of the consumer finance industries around modernizing some of those requirements, so that companies and their employees are able to work from home effectively.”
Those laws could involve ensuring that data is protected, and necessary systems are in place for more people to work remotely, Liu said.
With any federal legislation that touches the fintech industry, Liu said that states’ role in financial regulation needs to be reflected and appreciated.
“We’ve got a federalist structure and a balance of powers between the state and federal government,” she said. “The federal government can do a lot in terms of systemic stability and in some areas of standardization, but we think it’s really important that the states and their kind of local accountability is preserved in whatever Congress might do.”
The forum also featured a roundtable discussion, moderated by Sabrina Devito, chief strategy officer at Marlette Funding, where panelists explored the benefits that Delaware currently provides for fintech companies and what the First State can do to capture more of the industry.
Marlette Funding founder and CEO Jeffrey Meiler said Delaware is the “ideal place to build a fintech company” because of is low cost and “very business-friendly” regulatory stance. East Coast fintech companies have a better employee base than their West Coast counterparts, he added.
“Our performance and execution in many ways has been stronger than our competitors, and I put that entirely down to the advantage we have with our employee base,” Meiler said. “Many of my competitors are West Coast-based and they just don’t have the same quantity and quality of employee base with financial service and banking background.”
Rob Hagood, president and CEO of Fair Square Financial LLC, said that because Delaware is the “credit card capital of the universe,” it has easy access to other large cities, such as Philadelphia, New York City, and Washington, D.C.
“It’s really hard to beat,” he said.
But that doesn’t mean there isn’t room for improvement, the panelists said.
Meiler suggested that the University of Delaware should invest more in “decision sciences” and practical, hands-on tech classes and curriculum, which he said would be benefit not only the fintech industry, but the broader financial services industry in Delaware.
Delaware should also support and grow its technology trade schools, Meiler said.
“I have colleagues at Marlette that I think believe that a background at one of these tech trade schools, perhaps at first, is even more valuable than a college education in landing a job and hitting the ground running,” he said.
Joe DePaulo, co-founder, chairman and CEO of College Ave. Student Loans, said that Delaware generally needs to make the state a place for more companies to put down roots.
“It helps us to have more companies because it just attracts more talent,” DePaulo said. “Critical mass is really important.
Credit Shop CEO Jim Peterson said there is also a lot of room for smaller companies to make their mark – and maybe even be more attentive to customer’s needs than larger companies.
“Looking back on the beginning of the crisis, we were able to move a lot quicker than the big money center banks to react, respond and deploy customer support assistance,” he said.
By Marcus Dieterle