Jeffrey Bandman, former CFTC commissioner, and Hans Morris, of NYCA, talk about partnering with regulators as the path forward for fintechs.
Despite their role as fintech companies’ watchdog, there is a desire among global regulators to foster innovation and partner with new startups in the fintech space, says Jeffrey Bandman, formerly of the Commodities Futures and Trading Commission (CFTC). However, he acknowledged a shift in administration in the US, constrained budgetary resources, and navigating legacy infrastructure make the path forward for partnerships uncertain.
Han Morris, General Partner at NYCA, joined Bandman on a panel moderated by Peter Rudegeair of the Wall Street Journal at CB Insights’ Future of Fintech conference. Morris agrees that fintechs should look to partner with regulators and advises his firm’s portfolio companies to do so early.
“Virtually all the activity is regulated for good reason,” Morris says. Partnering early should allow companies to more easily gain regulatory approval and reduce future challenges.
Jeffrey Bandman noted that before leaving the CFTC, he was involved with an internal initiative known as the Lab that was formed to help develop and engage with fintech startups more closely. The CFTC not only used the initiative to think about fostering innovation among fintechs, but also to learn new ways the CFTC could leverage technology internally, with onboarding as a particular area of interest for the organization.
The CFTC has also been actively engaging with regulators around the globe to learn best practices on how they are partnering with fintechs and overseeing fintech’s development. The UK’s Financial Conduct Authority (FCA) stood out as the first regulator to set up a regulatory “sandbox” for startups to develop their technology.
But while the CFTC may be open to new business models and interested in fostering innovation, Bandman noted that regulators can’t move at the pace of startups. They can’t settle for getting 80% of regulation and just “failing fast” because it would damage the public’s trust in regulation.