US States' Rights and Fintech?
I moved to the United States (from England) well over a decade ago now, but one thing that I’ve always found interesting, puzzling and at times downright dumbfounding is the various levels of government. City, county, state and federal government bodies – all with a role to play. However, as I studied the history of my new home, I’ve became increasingly fascinated with how the Constitution and Bill of Rights were written.
The 10th amendment always stood out to me as something capable of creating states rather diverse in character. In theory, they could operate as very independent states and create a way of life aligned with the views of their electorate. Fascinating stuff in theory, but what are some examples?
- California wants to pass policies with healthcare for all? Go for it!
- Utah wants to pass policies with no income taxes? Go for it!
- New York wants to challenge the Federal Government? Go for it!
Well, I’m more of a payments nerd than a policy wonk, but this last example covers both states’ rights and the fintech scene. And the state of New York has in fact sued the Federal Government over its “Fintech Charter.”
Ultimately, if New York wins, and sets a precedent for the state to control its own destiny regarding fintech regulation, it could create an incentive for more states to develop banking/fintech-friendly regulations.
This is not unlike the credit card industry in the 1980s, when South Dakota's usury laws were changed to eliminate the cap on interest rates and fees, and Citibank subsequently moved to Sioux Falls. At the time, Sioux Falls had a population of about 80,000. Today, Citi employs 2,900 in a financial services sector that includes more than 16,000 and the city’s total population is a quarter of a million. And amazingly South Dakota, as a state, has over $2.5 trillion in bank assets.
But back to the 10th amendment and payments. States have an opportunity to be at the forefront of a booming industry, and to develop frameworks and ecosystems that are aligned with the future.
In a conversation with one policy maker, I came to understand that one of the jobs is to put in place policies and incentives to attract, train and retain corporations and top level talent.
From a payments and banking perspective, the future is open banking and the integration of banks and fintechs. In theory, if a state creates a fintech charter based on open banking, coupled with the right incentives to build out a workforce, that state could reap significant rewards. These incentives could encourage a bank, or a larger fintech, to build out operations, provide well-paid technology roles and help create a vibrant ecosystem that boosts local economies.
In today’s world, we are obsessed with the future. The pending battle between New York and the federal government gives us an opportunity to look to the past, and learn from South Dakota; the question is, which states will apply that thinking to today’s world?
Download our whitepaper “The Emerging Marketing Opportunity for Open APIs in Commercial Banking” [PDF]
Related Blog Posts
Payments and Fraud: The Paradox Twins
Digital commerce through web and mobile is where merchants predominantly experience shopper growth today. This has become a hugely important domain for their focus. It offers a means for international growth, new market penetration and a way to engage with shopper-hungry Millennials in their culture. Merchants frequently adopt a Digital-First, eCommerce-First or Mobile-First strategy to ensure full corporate buy-in to this strategy.
Open Payments Systems for Merchants: Don't Close Down Your Options
Remember “Open Systems”?
It was a big industry nom du jour in the 80s and 90s. Every IT system had to be open and therefore flexible and future-proof. Nobody can argue with the logic behind this; making systems easy to integrate with other systems, ensuring vendors could cooperate with one another; creating agility to improve time to market and drive down costs.
Why It’s Time for Women to Rise UP
As a senior software engineer at ACI Worldwide, Rawan Shawar helps to guide her team’s priorities and enhance processes at both the team and organizational level. Recently, Rawan was selected by the organizers of Money20/20 Asia to be part the Rise Up Class of 2019.
Can Digital Payments Be Kind?
There is no doubt that the era of less (or minimal) cash is truly upon us. According to the Access to Cash Review, cash could fall to just 10 percent of all payments in the UK within the next 15 years.
Other countries, such as Sweden, have already seen significant changes – cashless payments have grown so quickly that only 10 percent of the 20 SEB banks in Stockholm now hold cash. Beyond Europe, China is leading the way with USD$12.8 trillion in mobile payment transactions in 2018.
Keeping Up With Fraudsters: A Month Isn’t Enough
As the Government of Canada campaigns for improved fraud prevention and awareness this month, I’d like to do my part as a fellow Canadian, and shed some light on why payments need to stay a step (or more) ahead of fraudsters, today more than ever.
Local Perspectives: Real-Time Realities Across Asia-Pacific in 2019
Money20/20 Asia returns to Singapore this week, attracting payments professionals from around the vast APAC region – and beyond. The real-time and open imperative is one of the reasons why all eyes are on Asia-Pacific when it comes to payments, so I caught up with ACI payments experts representing three of the key countries within the region, to take the pulse of real-time schemes that are in varying stages of maturity.
What it Takes to be an ‘Influential Woman in Payments’ [Q&A]
Coming off the back of International Women’s Day this past weekend, PaymentsSource has recognized the Most Influential Women in Payments, spanning multiple industries including financial services, retail, investment and technology. Among the honorees is ACI’s very own Carolyn Homberger, group president, global sales. Part of the executive leadership team at ACI, Carolyn leads a team of payments professionals operating across all global regions, and plays a critical role in setting business strategy. As an advocate for the leadership and growth of women in the payments industry, Carolyn is also responsible for launching ACI’s own Women’s Initiative.
What We Talk About When We Talk About Digital Transformation
The recent headline grabbing announcement that Banco Santander has signed a USD $700M contract with IBM got me thinking… what’s up with ‘Digital Transformation’ these days? Santander’s announcement was all about digital transformation… and they are a forward-thinking bank. The new global technology agreement is designed to increase efficiencies in the bank’s operations, enable it to be more innovative and deliver new products, faster. But not every bank can pony up $700M and not every bank has suitable technology in place. It got me thinking, what is actually needed for digital transformation?
Putting Malaysia on the Path to Payments Innovation
The public launch of the DuitNow instant credit transfer service, in December 2018, provides just a taste of what lies ahead as Malaysia’s Real-time Retail Payments Platform (RPP) is progressively rolled out. Fueled by Bank Negara’s (BNM) increasing support for e-payment platform development, there has been a steady increase in mobile wallet and digital payment usage, setting the stage for 2019 to be a year of transformation for the payments industry in Malaysia.
What Can the Re-Regulation of Other Industries Tell Us About Open Banking One Year On?
UK Open Banking just reached its first birthday milestone (on January 13 to be precise) and given my own commentary – including in the ACI blog – on this topic, the first anniversary of Open Banking in the UK certainly won’t pass without a debrief on the progress that’s been made and what challenges lie ahead.