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U.S. Government Accountability Office Issues Long-Awaited Report on FinTech Industry

The U.S. GAO has issued a long-awaited report on the fintech industry, which focuses on the regulation of marketplace lenders, mobile payments, digital wealth management platforms and distributed ledger technology (“DLT” – often referred to as blockchain). For each of these fintech industry “subsectors,” the GAO report details the nature of the subsector and how it operates, as well as its potential benefits and risks.  Moreover, the GAO report addresses industry trends, regulation and oversight for each subsector.

Marketplace lenders.  The GAO report indicates that marketplace lenders may provide expanded and quick access to credit at lower cost than banks, although the report also notes risks related to loan term transparency and certain protections for small business borrowers.  

Mobile Payments.  The GAO report states that mobile wallets can allow consumers to conveniently and efficiently conduct financial transactions, but the report also indicates that mobile payment methods can pose certain data security risks, as well as “operational risk for human error.”

Digital wealth management platforms. The GAO report found that digital wealth management platforms may provide investors a convenient, low-cost way to invest.  The report also notes risks concerning the impact of insufficient or incomplete data from investors on their portfolio goals.

DLT.  The GAO report indicates that DLT may foster transparency and efficiency in the marketplace, although the report also describes potential operational and security risks.

According to the GAO report, further development of DLT will be necessary to understand how it will be regulated under current laws and regulations. For all other subsectors, the GAO report indicates that state and/or federal regulation generally depends on the nature of the business model and services provided.  The report does not make any recommendations about regulation, and is the first in a series of expected GAO reports about the fintech industry.  Further blog posts will be posted as additional reports are issued.

Copyright 2020 K & L Gates


About this Author

Judith E. Rinearson, KL Gates, federal consumer protection lawyer, anti money laundering attorney

Judith Rinearson is a partner in the firm’s New York and London offices. Ms. Rinearson concentrates her practice in prepaid and emerging payment systems, electronic payments, crypto/virtual currencies, reward programs, ACH and check processing. She has more than 25 years of experience in the financial services industry, including 18 years at American Express’s General Counsel’s Office. Her expertise focuses particularly in the areas of emerging payments and compliance with state and federal consumer protection laws, anti-money laundering laws, state money transmitter...

Eric A. Love, KL Gates, Capital Markets Compliance Lawyer, Treasury Legislation Attorney
Law Clerk

Eric A. Love is a member of K&L Gates’ Public Policy and Law Practice and is based in the Washington, D.C. office. Mr. Love focuses on federal legislative and regulatory policy issues related to financial services and capital markets, with a particular emphasis on securities and corporate governance. 

Prior to joining K&L Gates, Mr. Love served as a special assistant in the Office of Legislative Affairs at the U.S. Department of the Treasury. In this capacity, he worked to help advance Treasury’s legislative agenda on a broad portfolio of international economic issues, including international financial services regulation, development, banking and securities, trade and investment, climate finance and monetary affairs. 

Immediately before joining Treasury, Mr. Love served for six years in a number of positions in the office of Congressman Melvin L. Watt of North Carolina, including as the senior legislative staff member responsible for advising the Congressman on all issues within the jurisdiction of the House Financial Services Committee.