Financial tech (fintech) startups are multiplying all the time as entrepreneurs figure out new ways to apply technology to solving the problems and frustrations that surround financial activity. But disrupting the world of finance comes with obstacles too, as the regulations that govern fintech can be outdated or not yet existent. And lawmakers and other regulators are starting to take note.
"I have a real interest in fintech and the development of big data," Rep. Patrick McHenry (R-NC) told a group of fellow Congressmen and fintech startup founders at a roundtable event on Monday. "We're here for ideas. I want to see how they help with social challenges like the unbanked and marginally banked."
McHenry, the deputy whip and vice chairman of the House Financial Services Committee, had arranged for the event at D.C. startup incubator 1776 as a chance to talk about where financial regulations and reform can help improve matters for fintech startups. The six Republican members of Congress present all represent constituencies with an interest in tech and startups, including Rep. Elise Stefanik from New York, one of only a small handful millennials in Congress.
"We have to rethink the regulatory structure," Stefanik said. "There needs to be recognition as tech grows that the structure is not modernized for the 21st century."
A lot of the regulatory problems the companies mentioned revolve more around the lack of regulation than any particular kind of rule. The work they do doesn't always fall under neat categories that already exist.
"We don't always know what the rules are," said Dan Kleinbaum, the COO of Beyonic, a company that helps set up mobile money payments in emerging markets. "It makes it difficult to know if you're doing something illegal."
Even where there are rules, the difficulties of navigating the regulation differences between state regulations can be tough. Shally Venugopal, CEO of mortgage marketplace platform Myolo mentioned that applying to operate in some states has been particularly tricky, such as California.
"We're not that friendly that way," said Rep. Mimi Waters of California. "We have to keep the government out so we don't stifle innovation."
Another issue raised was immigration, which several of the startup founders said could make getting the talent they needed difficult, even if it was the founders themselves.
"It took me almost a year to sort it out for myself," said Dale Nirvani Pfeifer, a native of New Zealand and founder and CEO of hashtag charity donation startup GoodWorld.
There was definitely a general consensus among the lawmakers and startup founders that changes and updates are necessary. But, the actual form of those changes was far from clear. As Stefanik pointed out, the fast-changing world of startups and millennials requires regulations that reflect today's physical and business speed.
"There's a lot more mobility," Stefanik said. "There needs to be flexibility.
