But while many of these partnerships have proven beneficial to banks and consumers alike, Nichols cautioned that consumers may not be aware of differences in data security and other standards between the heavily regulated financial industry and the fintech sector.
For customers, a loan is a loan and a payment is a payment. They don’t care whether a bank provides the service. Because of some regulatory gaps and uncertainty, they should.
Since fintech firms are currently not subject to the same compliance examinations as their bank competitors, consumer protection lapses by nonbank providers are typically only discovered after some harm has already occurred, which exposes consumers to greater risk. At the same time, fintech companies are not burdened with the same operational and compliance costs banks must meet in order to ensure regulatory compliance.
Nichols called for consistent regulatory treatment of activities like payments, loans, deposits and other financial products, regardless of the provider, adding that doing so would help eliminate customer confusion and encourage more robust collaboration between banks and fintechs.