Financial technology (fintech) is changing the dynamics of banking and how financial institutions deliver their products and services. Lending is one area where fintech has made an impact already according to Tracy Basinger, group vice president of Financial Institution Supervision and Credit (FISC) at the SF Fed.
“A lot of these so-called ‘marketplace lenders’ developed platforms to deliver loans to consumers. The industry has grown to, as we understand it, well over a hundred such lenders,” says Basinger.
People have gravitated toward marketplace lenders for ease of use, fewer expenses, and online convenience. Even though the Fed doesn’t regulate these lenders as a general rule, banking regulators are closely watching them and other fintech companies, such as peer-to-peer payment services.
“Almost every one of these companies has a bank partner at some stage of the process. Since we regulate those banks, it’s important that we understand what those partnerships look like and the implications for banks and consumers,” explains Basinger.
FISC has engaged Federal Reserve System colleagues, including researchers and statisticians, to ensure the Fed has a solid understanding of fintech innovation and emerging companies.
“We have payment system responsibilities that get at the heart of some of these new tools that are designed to make payments easier and faster,” says Basinger.
Underlying the Fed’s work is the idea that appropriately designed innovation holds great potential to benefit consumers and small businesses. Basinger says, “Our overall responsibility is for the safety and soundness of the institutions we supervise and to protect consumers.”
This interview is part of our 2015 annual report, What We’ve Learned…and why it matters.
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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.