"Square peg meets round hole: Regulatory responses to challenges created by innovation in banking" by Jonice Gray Tucker, Daniel P. Stipano, Kari K. Hall, Brendan Clegg, and Anthony Carral (The Business Lawyer)
The Business LawyerKari K. Hall, Daniel P. Stipano, Jonice Gray Tucker, Anthony Carral, Brendan Clegg
During the past decade, an underlying tension between the financial sector’s embrace of innovative products and services and the regulatory framework that governs the industry surfaced—and that tension has since become even more acute during the COVID-19 pandemic. Facing pressure from customers’ twenty-first century expectations and competition from emerging fintechs, banks began implementing technological advances into their businesses even before disruptions to the U.S. financial system caused by the coronavirus placed a spotlight on the critical role those advances will play in banking’s future. This article highlights a number of areas of law where the governing framework erected during bygone eras has hindered the industry’s adoption of innovation and proven incompatible with the digital revolution that has changed the business of banking. This article also explores the successes and failures of a range of approaches adopted by the federal regulatory agencies responsible for the framework’s design, implementation, and enforcement as they try to mitigate this tension. The degree to which these agencies embrace innovation in the industry, and use the tools at their disposal to encourage its continuation, will go a long way toward determining whether banks can weather this period of economic disruption, meet the changing needs of their customers, and fend off competition from industry upstarts.
Originally published in The Business Lawyer; reprinted with permission.