Season 2 | Ep. 48: 2024 Election Insights: The Path Forward for Banks and FinTechs Under Trump’s Presidency

In the latest Risk Intel Podcast, Ed Vincent sat down with Ian P. Moloney, SVP, Head of Policy and Regulatory Affairs, and Hayden Cole, Director of Federal Government Affairs from the American FinTech Council (AFC), to discuss what the 2024 election results will mean for financial services regulation, enforcement, and bank-FinTech partnerships. They explored expected regulatory shifts, changes in congressional leadership, and proactive strategies for financial institutions navigating these transitions. Below you can listen to the full podcast or read the major takeaways that every risk manager and financial institution leader needs to know to prepare for the next four years.

Evolving Regulatory Environment: Anticipating Lighter-Touch Regulation

A central theme discussed by Ian and Hayden is the anticipated shift towards "lighter-touch" regulation. With the Congressional Review Act in play, there’s a safeguard against extreme regulatory changes as the current administration exits, aiming to avoid sudden, unrestrained deregulation. The expectation is that oversight bodies will adopt a less aggressive stance, especially compared to previous years. Ian shared that during this transition, financial institutions may observe fewer formal enforcement actions. Rather than public sanctions, regulators might lean on confidential “Matters Requiring Attention” (MRAs) or “Matters Requiring Immediate Attention”(MRIAs), keeping certain interpretative details out of the public eye.

For financial institutions, this means they may face less stringent enforcement, but risk managers should remain vigilant. Reduced public documentation can complicate efforts to interpret evolving regulations, so staying informed through direct engagement with regulators is crucial. Regularly monitoring guidance from oversight bodies will help institutions anticipate the potential impacts of changing regulations on day-to-day operations and ensure they are well-prepared for any updates.

Shifting Congressional Leadership: Pro-Innovation Leaders at the Helm

The turnover in congressional leadership, particularly within key financial services committees, will have a profound impact on regulatory direction. With the retirement of the House Financial Services Committee's former leader, frontrunners like Representatives French Hill and Andy Barr are positioned to take on leadership roles. Both Hill and Barr have shown strong support for innovation and FinTech-friendly policies, a promising sign for financial institutions interested in pursuing new products and technology partnerships.

“With French Hill and Andy Barr likely to step in as committee leaders, financial institutions can expect a more innovation-friendly approach. These leaders recognize the role of FinTech in driving competitiveness” – Hayden Cole

During the podcast, Ian and Hayden noted that these new committee leaders will likely advocate for a balanced approach, fostering responsible innovation without imposing excessive regulatory burdens on community banks and FinTech firms. However, financial institutions should recognize that state regulators could serve as an important final check. Remaining proactive with both federal and state oversight agencies can help institutions anticipate and adapt to evolving regulatory expectations, especially in states like New York and California, where stricter regulations are likely to persist.

Proactive Engagement with Regulators: Building Resilience and Adaptability

One of the key strategies highlighted in the discussion was the importance of proactive engagement with both federal and state regulators. Given the political shifts, financial institutions are encouraged to establish robust communication channels with examiners to better navigate regulatory changes. Ian emphasized that regular communication with regulators can help institutions interpret new guidelines and make necessary adjustments promptly.

“We’re advising our members to be proactive with regulators at all levels … the more they communicate with examiners, the more effectively they can manage these transitions” – Ian P. Moloney

Ed suggested several practical steps for bank leaders and risk managers. These include creating adaptable risk management frameworks that can quickly pivot to meet regulatory changes, preparing compliance teams to implement new requirements efficiently, and keeping stakeholders informed on how these shifts may impact their experience. Scenario planning and resilience-building are also key, enabling institutions to weather political changes while maintaining customer trust.

Opportunities for Bank-FinTech Partnerships: A New Era of Innovation

As a proponent of responsible bank-FinTech collaboration, the American FinTech Council believes the evolving regulatory landscape may unlock new opportunities for partnerships. Ian and Hayden explained that regulatory shifts could create a friendlier environment for FinTech innovations, particularly around earned wage access (EWA) products and other novel financial services. With fewer immediate barriers, community banks have the chance to enhance their service offerings, provided they have strong risk management practices in place.

However, with increased innovation comes added risk. To manage this, Ian recommended that financial institutions prioritize due diligence and develop robust frameworks for monitoring FinTech partnerships. He noted that AFC supports member institutions with tools and resources to navigate these collaborations responsibly, encouraging a focus on sustainable and customer-centric growth.

Strategic Guidance from the American FinTech Council: Supporting Members through Policy Shifts

Finally, the AFC’s commitment to supporting its members through these political changes was a major point of discussion. Ian and Hayden explained that the AFC is actively involved in advocating for policies that benefit both banks and FinTech firms, with a focus on promoting regulatory frameworks that support innovation without compromising consumer protection. They emphasized that the AFC’s mission includes ensuring that FinTech regulations remain apolitical and balanced, allowing institutions to innovate responsibly.

The AFC is well-prepared to help its members navigate this shifting landscape. Financial institutions are advised to stay engaged with the Council's resources, which include advocacy initiatives, best practices, and guidance on compliance and risk management. By leveraging these resources, institutions can stay informed and resilient, positioning themselves for long-term success amid the changing regulatory environment.

Learn about the AFC's mission and recent letter regarding the future of bank-fintech partnerships.

This episode of the Risk Intel Podcast provides essential insights for financial institutions and fintech firms facing a dynamic regulatory and political landscape. As leadership shifts and policies evolve, remember to be proactive with regulators, foster innovation responsibly, and building adaptable risk frameworks to navigate these changes effectively. By staying informed and leveraging resources from partners like the American Fintech Council and SRA Watchtower, financial leaders can position their organizations for resilience and success.

Keep following and listening to the Risk Intel for more expert guidance on managing risk and embracing change in financial services.