Words like “disruption” and “democratization” are flung around casually by many tech entrepreneurs and venture capitalists in the mistaken belief that these are noble causes in and of themselves. In the world of tech startups seeking to reinvent our financial lives, disruption and democratization are high ideals only to the degree that they address antiquated or broken systems and lead to products and services that actually improve things for greater financial inclusion.
Netflix is a good example of disruption that actually made a difference. In its early days renting DVDs online, the company’s mission was described by many as democratizing movie distribution – finding audiences for lower-budget, independent films struggling for visibility and viability. It was certainly a disruptive idea. Netflix’s algorithm could identify subscribers with an interest in, say, socially-conscious documentaries and recommend those films. This was inarguably good for documentary filmmakers, but it was great for Netflix customers – helping the company deliver on its real mission of creating targeted content and connecting people with the movies they’d love.
Recently, important yet measured steps were taken to encourage and foster innovation in financial services. The U.S. Treasury Department released a long-awaited “fintech” report, and the Office of the Comptroller of the Currency (“OCC”) issue guidance on a limited special purpose national bank charter.
A national charter will enable online lenders, payment apps and other web-based financial services to become nationally regulated. They are currently being subjected to uneven patchwork of state laws. For larger companies doing business across the country, state law compliance is difficult and costly, but for smaller businesses, it is financially impractical.
The idea of a national fintech charter was originally proposed by then-Comptroller of the Currency Thomas J. Curry, who summed up his thinking in a closely watched speech at Georgetown University Law Center in December 2016.
“It is clear that fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters,” the Comptroller said.
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