Michael Hsu, Acting Comptroller of the Currency, a significant U.S. bank regulator, cautioned on Wednesday that the growth of fintech services and digital banking might lead to long-term financial dangers and perhaps a catastrophe. The encroachment of fintech companies into the traditional financial sector, including via partnerships with banks, was increasing complexity and “de-integration” across the banking sector, Hsu noted at a conference in New York. “I believe fintech and big techs are having a large impact and warrant much more of our attention,” Hsu said.
According to Hsu, this raises concerns about customer protection as well as IT risks related to information security and resilience. Unseen dangers often accumulate and subsequently become the cause of unpleasant surprises, as we learned from the financial crisis of 2008, said Hsu. Gene Ludwig, a former Comptroller of the Currency, had issued a warning about the fact that fintech laws are significantly less stringent than those that apply to banks.
The non-banking sector is getting away with murder, according to Ludwig, who is currently the managing partner of the venture capital company Canapi Ventures. If we don’t take action, Ludwig asserted, non-banks “will bring us into the next financial disaster.”