WASHINGTON – Partnerships between banks and fintech companies benefit consumers if done wisely, the Treasury said in a report on Wednesday.
The approval of the bank-fintech relationship, with adequate safeguards, comes as regulators have noted that such arrangements are growing rapidly, raising concerns about activities that may fall outside the scope of the law.
While there may be loopholes in the rules of that relationship, a Treasury official said Tuesday, the partnership between banks and fintech companies has led to new products targeting specific communities that financial institutions have never done before.
The bank-fintech partnership also enabled companies to offer products at a competitive price, the Treasury said.
Regulators can encourage competition with existing authorities and better protect consumers, Treasury Secretary Janet Yellen said in a statement released ahead of the report.
In a report, the Treasury Department recommends that banking regulators finalize guidance proposed last year on how banks should manage relationships with third parties, which should include language encouraging banks to effectively monitor their contracts with fintech companies and other third parties service providers.
While the guidelines were recommended by bank executives, the Treasury report suggested that other federal agencies, including the Consumer Financial Protection Bureau and the Federal Trade Commission, could also play a role in overseeing the partnership.
The Treasury report follows an executive order signed by President Joe Biden last year to promote competition in the American economy.
Biden called on unions to eliminate anti-competitive behavior in sectors. The State Treasury has previously published joint reports on the competitive situation in the labor market and the market of beer, wine, and spirits.