House Financial Services Committee Holds Field Hearing on Partnerships Between Financial Institutions and Fintech

Earlier this month, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy held a field hearing in Kentucky for banking and fintech executives who argued that their partnerships can transform financial services and increase financial inclusion. The hearing was titled “Financial Institution-Fintech Partnerships: Leveraging Third-Party Relationships to Increase Access to Financial Services.”

“With adherence to prudent risk management of these relationships, financial institutions can better serve communities, including facilitating expanded opportunities and inclusion in the form of access to financial services to those who may be less likely to access financial services through traditional bank products,” said subcommittee chairman Rep. Andy Barr (R-Ky.).

According to PYMNTS, Kirk Chartier, chief strategy office of online lender Enova, said that analytics and machine learning have allowed the company to facilitate $55 billion in loans to business and consumers. The company acts as a service provider to community banks, so much of its service has been to consumers with credit scores of about 600 and average incomes of $40,000. 

Chartier also said that there have been examples of regulatory overreach, namely by the Consumer Fincancial Protextion Bureau (CFPB). Enova has urged Congress to enact the CFPB Transparency and Accountability Reform Act “to provide certainty to the agency and the industry that will allow them to work more effectively to deliver innovation and high-quality financial services to consumers and small businesses.”

Additionally, Steve Trager, executive chair of Republic Bank & Trust Company, said that the bank offers small-dollar credit products for consumers that are serviced by fintech program managers, such as medical debt financing products and installment and line of credit loans. He noted that the fintechs benefit from the banks’ oversight experience and backend infrastructure. 

“Consumers can be assured the products offered through joint bank/FinTech programs comply with consumer protection laws including credit reporting, debt collection, privacy, and electronic funds transfers,” Trager said.