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
What’s Next for Nordic Payments? P27 and the Rise of Real-Time and Cross-Border
The Nordic region has long been considered a pioneer of digital payments, with some of the lowest cash usage levels in Europe; however, the impact on cross-border payments has been limited when compared to progress on the domestic front. And this is a crucial area to address for a region with large volumes of trade and tourism between neighbors, as evidenced by the fact that 18,000 Swedish workers commute to Denmark on a daily basis. Not surprisingly, improving the cross-border payments experience and efficiency is a high priority.
Digital Overlay Services Unlock the Value of Real-Time Payments
The global payments industry continues to drive toward true real-time, with the potential opportunity for corporate banking often cited as the most lucrative.
Real-Time Payments Hits its Stride in the U.S.
The recent announcement of FedNow in the U.S., the launch of cross-border services like SWIFT gpi, and multiple real-time payment systems including The Clearing House’s (TCH) RTP system and Zelle underline the fact that real-time payments are here to stay. The need to deliver real-time payment services to customers has never been more pressing for banks, credit unions, processors, acquirers and fintechs. However, the U.S. payments ecosystem – and its infrastructure – must keep pace with global markets to remain competitive, and interoperability between real-time payment systems will be key.
How Do You Drive Full Value from SWIFT gpi?
As part of SWIFT and ACI Worldwide’s joint mission to accelerate adoption of SWIFT gpi, ACI’s SWIFT gpi global marketing lead Zhenya Winter spoke with Daniel Lynch, Data Analytics and Payments Innovation Lead at SWIFT, and ACI’s Global Head of Real-Time Payments, Craig Ramsey, about some of the key questions raised by attendees of our second Global Webinar: Drive Full Value from SWIFT gpi. The relevancy of these was reinforced at Sibos 2019, the SWIFT community’s annual conference, which recently took place in London.
India’s Unified Payments Interface: Breaking the Billion Barrier
September brought about quite a stir in the Indian payments ecosystem, with three years passing since the launch of UPI (Unified Payments Interface), and the realization that UPI is closing in on a significant milestone: one billion transactions per month. In September 2019, UPI clocked 955 million transactions, amounting to 1.61 trillion rupees (INR), demonstrating the extent to which Indian consumers have exuberantly welcomed real-time payments.
The Need for Financial Inclusion in Developing Countries
The payments ecosystem globally is changing – and the idea of financial inclusion is increasingly featuring as part of long-term strategy. At a glance, financial inclusion means that people and businesses have access to important financial products, services and data, such as transactions, credit cards, payments, savings and insurance, and that these are delivered in a sustainable way. The challenge for banks lies in being more inclusive and meeting social needs, while remaining profitable and increasing market share.
How to Maximize the Value of Partnerships Between Fintechs and FIs
The LATAM Open Banking & Fintech Partnership, organized by Connect Global Group, was held earlier this year in Mexico City, and ACI participated as one of the forum partners driving discussions on how to maximize value from collaborative partnerships between FIs and Fintechs. We explored the invaluable benefits of open API and strategies to differentiate the offerings of FIs and Fintechs, address consumer demands, and best practices for implementation aligned to regulatory requirements.
Universal Confirmations: Get Ready for 2020
With the arrival of universal confirmations, we sit down with some industry experts to find out more about what impact this will have on transforming cross-border payments. We’re welcomed by Fabien Depasse - Head of SWIFT gpi Customer Success at SWIFT and Craig Ramsey - Head of Real-Time Payments at ACI Worldwide.
How to be a Payments Trailblazer – The Seven Habits of Highly Innovative Organizations
The new Culture of Innovation Index from Ovum and ACI identified segments—from banks to intermediaries to merchants to corporates—at the cutting edge (of innovation) across the payments ecosystem. But what is most notable about those segments that have reached ‘trailblazing’ status is the apparent lack of commonality between them. No one segment, nor one region fosters better innovation. In fact, what’s driving these segments/organizations to be best of breed is their own culture of excellence. The only thing they have in common is their attitude.
How will SWIFT gpi Impact Latin America?
As the world continues to transition toward real-time, and technology continues to evolve, new challengers are disrupting the market with value propositions including real-time cross- border payments. The competition has inspired SWIFT to work with the industry and challengers to create the Global Payments Innovation (GPI) program, which radically changes the way banks interact with their correspondents and offers improved transparency and customer service to their customers.