The Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C., US, on Sunday, May 22, 2022. The Federal Reserve raised interest rates by 50 basis points earlier this month and the chairman indicated it was on track to make similar-sized moves at its meetings in June and July. Photographer: Joshua Roberts/Bloomberg via Getty Images
Photo: Joshua Roberts/Bloomberg via Getty Images

The CFPB wants banks and fintechs to do better

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Friday: the CFPB weighs in on financial data, Revolut pays with crypto, and the OCC elevates fintech.

Off the chain

I’m gripped by nostalgia due to the oddest things — like Stripe’s announcement that is now fully available in Thailand, one of 47 countries where it operates. I remember noticing a Canadian flag in Stripe’s office on Second Street in San Francisco — this was well before it decamped to the Mission District and then the suburbs — and quizzing Patrick Collison about it. He told me his startup was indeed planning to venture north of the border. Stripe is still coy about its IPO plans, but its global expansion tells you everything you need to know. Pair a mature (and hopefully profitable) domestic business with fast-growing international markets and you’ve got a combination that investors are likely to swipe up.

— Owen Thomas (email | twitter)

The CFPB wants a ‘race to the top’

The Consumer Financial Protection Bureau kicked off a rule-making process to give consumers more control over their financial data, a step toward an open-banking concept that director Rohit Chopra told Protocol he hopes initiates a "race to the top."

Consumers benefit when markets are more decentralized, Chopra said in an interview Thursday. “I want a financial market where consumers can switch products more seamlessly, and where financial companies have to constantly compete to keep them,” he said.

  • Chopra announced the kick-off of the long-awaited rule-making process in a speech on Tuesday at the Money20/20 conference in Las Vegas. Congress tasked the CFPB with creating the data-sharing standards under the 2010 Dodd-Frank law, but the agency had yet to activate its authority.
  • “Our goal is to accelerate the shift toward open banking and ultimately give more leverage to consumers to find the products best for them," Chopra told Protocol.
  • The CFPB released a 71-page outline of its priorities in the rule-making process, which starts with a review by a small business panel, as required by law. A formal proposal would come next year and could be finalized by 2024.

The rule is focused on transaction accounts, such as deposit accounts and credit cards. As described in the CFPB’s outline, one goal is to allow consumers to move their data as needed, including pulling transaction history from one account to another.

  • Fintech trade groups cheered the announcement, while banks have offered support for open banking in concept but insist there need to be equal standards for all players. Some financial institutions have already taken steps to ensure secure data sharing, as the American Bankers Association trade group said in a statement Thursday.
  • The CFPB wants to balance customer access to data and security — which Chopra says goes beyond preventing data breaches from companies.
  • "I think it's also a question of: What are people doing with the data once they get it?" Chopra said. "Are they actually using it to provide a product or underwrite a loan? Or are they going to monetize it by reselling it or resharing it? Making sure that people are only using it for the limited purpose that the consumer wants it to be used for is a key question for us."

The rule-making effort comes as the CFPB is facing a significant legal threat. A federal appeals court ruled last week that the CFPB's funding mechanism is unconstitutional, potentially undermining several of its most important rules.

  • Asked about the decision's potential impact on this rule-making effort, Chopra said the agency is forging ahead.
  • "This is a dormant authority that's over a decade old," Chopra said. "I think it's one of the most important rules the CFPB is working on, or will ever work on in its history. There's a lot of appetite from all across the industry and the advocacy community to get this one done. We're reviewing every court case that involves the CFPB. We've been doing that since day one. But we're forging ahead with this one."

The CFPB also announced this week in a press conference with President Joe Biden new guidance aimed at cracking down on "junk fees," including overdrafts. Chopra said there are connections between the battle against junk fees and the open-banking push. "I think in a world where there's more seamless switching, you'll see a race to the top when it comes to customer care, when it comes to fees, and when it comes to new features that really help people.”

— Ryan Deffenbaugh (email | twitter)

A version of this story first appeared on Read it here.


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On the money

Shopify got an earnings boost. The company's share jumped 17% after the ecommerce company reported a narrower-than-expected loss for the third quarter and revenue that beat Wall Street’s estimates.

The Treasury is having some tech problems. So many investors are scrambling to buy I Bonds — which pay a 9.62% interest rate if purchased by Oct. 28 — that the Treasury Department is warning its overwhelmed site might not complete all the orders in time.

Revolut will let users pay in crypto. The digital banking firm is adding a feature that allows customers to make everyday purchases with their crypto balance.

Google is building up its Web3 infrastructure offerings. The search giant is launching a cloud-based node engine service for Ethereum developers and projects.

A decision on election betting could come today. The CFTC set Oct. 28 as a target date to rule on whether fintech startup Kalshi can offer prediction contract trading based on the midterm elections.

The OCC does fintech

The Office of the Comptroller of the Currency is launching a new Office of Financial Technology early next year in response to the growth of fintech, the agency said Thursday. The new office will "build on and incorporate" the Office of Innovation, which the agency started in 2016.

"Financial technology is changing rapidly, and bank-fintech partnerships are likely to continue growing in number and complexity," said Michael Hsu, acting comptroller of the currency. "To ensure that the federal banking system is safe, sound, and fair today and well into the future, we need to have a deep understanding of financial technology and the financial technology landscape. The establishment of this office will enable us to be more agile and to promote responsible innovation, consistent with our mission.”

Some progressive senators have been urging the OCC to change its previous guidance, which gives chartered banks the ability to provide crypto custody, hold cash reserves backing stablecoins, and use blockchain and stablecoins to verify bank-to-bank payments. The senators say that the guidance exposes banks to "unnecessary risk." Meanwhile, more Wall Street firms and large banks are moving further into the use of cryptocurrencies.

— Tomio Geron (email | twitter)

The chart

The ways U.S. households accessed their bank accounts and finances have changed significantly in the last five years. Mobile banking rose sharply, while accessing accounts with the aid of a bank teller or an ATM declined. The change was “consistent with difficulties that households may have experienced in visiting a bank branch since the onset of the COVID-19 pandemic,” according to the FDIC.


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