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Jo Ann Barefoot explores how to create fair and inclusive consumer financial services through innovative ideas for industry and regulators

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Digital Gifts

Mallory Kwiatkowski

In this holiday season, many of us are giving and receiving ‘techie’ gifts and gadgets. Some of these are things that didn’t even exist a year ago. Inventors are building, fast, on the foundation of digitized information that has been laid down for us. Some of their creations are solving problems that had always seemed unsolvable, or had not even been perceived as problems at all, because there were never ways to solve them. It was things were.

As we end the year, imagine a tech-driven, problem-solving gift exchange among the people who care about finance, financial regulation and technology. The circle would include banks (small and large); fintech, regtech and tech companies; regulators, law enforcement, and legislators; and consumer advocates, NGO’s, and academics. They would be in the United States and other advanced economies and in the developing world.

Each of these groups often feels misunderstood by the others because they deeply know important things that the others don’t. What if they could, metaphorically, take the thing they would most like to have understood, place it in a box, wrap it in bright paper and ribbon, and present it to another group who, through the magic of the season, would open it, examine it, and miraculously grasp everything the giver knows about it? What problems might be solved if we could all see the changing financial world more holistically?

Here’s how the exchange might go.

From fintech and regtech firms to regulators and banks:

Both finance and financial regulation are transforming from analog to digital design. This is because data and computing power used to be scarce and expensive, and now are abundant and cheap. Digitization will change finance and financial regulation just as it changes everything else, making it all faster, cheaper, and better, and spurring innovation we can’t yet imagine.  Help us shape this transition to optimize benefits and manage risks.

From regtech firms to countries fighting terrorists and traffickers in drugs, guns and people:

We can help you stop them. The UN says the world catches only one percent of the $1.6 trillion in annual financial crime. We have new technology that can turn the tide in this battle, but we can’t use most of it until the laws and rules are modernized for technology, and to update our focus on law enforcement outcomes.

From regtech firms to political leaders concerned with the opioid crisis:

You’re missing what might be the best tool for solving this epidemic -- again, new technology can find the laundered money and help shut this down.

From fintechs to regulators:  

Innovation has the potential to solve most of people’s problems with financial inclusion and financial fairness, if you regulate it right.

From fintechs to consumer advocates:

Same. Look at the upside potential for consumers, and also help us understand the risks you fear so we can design solutions. Please help the regulators see the positive opportunity and encourage them to try new approaches.

From regtech firms to regulators:

We can improve policy outcomes and reduce costs at the same time. We know that sounds too good to be true, since historically cutting costs almost always compromised results. Now, though, digitized regulation can be both cheaper and better.

From regulators and advocates to fintechs:

These innovations can help people, but also harm them. Help us think through new regulatory standards.

From regulators to fintechs:

We can’t let high-risk activities into the banking system, no matter how promising they are. You can’t be a bank, or work with a bank in ways that endanger its customers or its stability, if you have a high risk of failure. This isn’t about bureaucracy or traditionalism. We have to guard the safety and soundness of the financial system and in turn, U. S. and global wellbeing. Help us learn to bring innovation into the system without risking it.

From regtech firms to community banks:

We might be your regulatory salvation, because we can dramatically cut your compliance costs, and cut your risks, at the same time. Help us make the regulators comfortable with our new regulatory solutions.

From policymakers and advocates to the tech world:

You’re at risk of losing public confidence in innovation due to data breaches and some companies engaging in unethical behavior. Help us build public and cultural consensus on standards, including ethics for using data and artificial intelligence.

From fintechs to fair lending advocates and regulators:

If you’ll let us use alternative data, we can make lending more inclusive and also more sound. The traditional tools exclude qualified people. Let us prove it to you.

From regulators and fair lending advocates to fintechs:

If we allow use of alternative data on lending, we’ll have to monitor how it fares through an economic downturn.

From the developing world and financial inclusion advocates to regulators:

“De-risking” to comply with Know-Your-Customer rules has become the new redlining. It’s blocking deserving people from economic access everywhere, and especially in the developing world. New technology can enable fast and inexpensive identity verification for almost everyone, improving both financial access and risk. We need to use it.

From government to financial and tech companies:

We have to do better on data protection and cyber-security. We can’t sustain an online economy that’s fundamentally unsafe. Data needs to be protected from criminals, from inappropriate use by you, and from inappropriate use by us. We know data is the life’s blood of innovation. Help us find new standards and technologies to use it well.

From fintech firms to policymakers and consumer advocates:

Protecting people from identity theft and cyber-threats requires moving beyond social security numbers. Government-issued ID numbers were designed for the paper-based era. Now those forms of identity are the easiest of all to steal, use and sell. Criminals enter stolen identity information online more accurately than real customers enter valid data, because their programs don’t make typos. We need high-tech authentication like biometrics, digital attestation, and data-based verification. Look to the developing world as the leaders.

From fintechs to community banks:

We might be able to solve your growth challenges. What if you could grow in place by enlarging your market vertically? Instead of having to add geographic locations, add new products, or locate in a growth market, you can grow inside your current footprint by soundly serving more of the people already there. The breakthrough is three technology trends. First, new data analytics enable more accurate underwriting of people who fail traditional risk screens. Second, new technology enables consumers and small businesses to manage their financial lives more easily, so you can equip people with tools that make them better customers. And third, you can grow inexpensively through mobile delivery instead of branches. Remember, lower-income people are disproportionately high users of mobile financial services. People have phones. They know how to use them. They interact with them constantly. Put your bank there.

From fintech and regtech firms to regulators throughout the world:

Look to the UK’s Financial Conduct Authority for inspiration and models on both how to regulate fintech and how to use regtech. They are far ahead of the rest of the world, although several other countries stand out.

From fintech and regtech firms and banks to U.S. policymakers:

The fragmentation of the U.S. financial regulatory system is a serious problem, and despite U.S. agencies’ helpful innovation initiatives, it’s getting worse. Innovation is breaking the molds of regulatory structures that were designed around old industries and products (consider Bitcoin and IPO’s). We have five federal regulators that directly supervise depository institutions, plus several dozen other federal agencies involved in financial policy, plus the fifty states. Innovators sometimes don’t know who regulates them. Many can’t scale up efficiently or even engage with banks. Good innovation may choke to death on regulatory confusion. Banks may lose competitive market share because it’s so hard for them to change. Other countries want to build regulatory bridges with the U.S., but can’t tell which agency to connect with. U.S. regulators need new models for close collaboration, rapid shared learning, and decision-making.

From U.S. regulators to legislators:

We need leeway to try new things and to communicate and collaborate more easily with each other and with industry. Old laws impede fluid communication, from the Administrative Procedures Act to the sunshine and anti-deficiency laws, all of which serve valid goals but need reexamination for the digital age. We also need your support as we undertake careful experimentation with both fintech innovation and with using regtech. We need to hire people like data scientists. We need objective research in areas like artificial intelligence and new uses of data. We’ll have to figure out where to get new resources.  Importantly, we -- and you -- need real expertise in how technology is changing finance and financial regulation.

From law enforcement and regtech firms to policymakers:

Here’s a question: are we sure it still makes sense to try to block money launderers from the financial system? It did when our AML laws were written, but back then we lacked today’s huge data sets and machine learning that can analyze patterns in how people move money. Maybe we should let the launderers in, identify them, watch them, and catch more major criminals. At the very least, we need much more high-tech use and sharing of data, including anonymized data typologies that the whole system can use to spot priority crimes.

From industry and regulators to academics:

We need objective research and testing of financial innovation, producing data that policymakers can trust. We need ways to do this quickly, to keep pace with today’s rapid cycles of technology change.

From fintech and regtech firms to regulators:

You will have to speed up. Not to accommodate us, but because the risks you guard against will rise unless the regulatory system can keep pace with technology change. We respect the fact that your agencies are designed for good reason to be careful and deliberate and risk averse. But technology is changing faster than traditional regulatory processes. Increasingly, the highest, more complex risks will arise because policy is lagging behind. We’ll need deep rethinking of regulatory design.

From regtech firms to universities:

We need people who are experts in both law and technology. Law schools should teach coding. Tech schools should teach regulatory design. We need new specialities in both professions building hybrid knowledge. We also may need new professional codes of conduct, like those in law and medicine, for data ethics.

From the developing world to the advanced economies:

Look to us for innovation. Our countries are ahead in some areas for two reasons. First, we’ve had much faster expansion of mobile financial services because we’ve had such rapid and broad adoption of cell phones (more people now have access to phones than to plumbing). This also means we have hundreds of millions of consumers who are getting their first-ever access to the financial system, so we’ve been learning how to serve and protect them. Second, some of our financial regulatory systems are younger and less entrenched than in the developed world, which makes some things harder, but also makes it easier to change. In both mobile services and regulation, we’re essentially doing a digital leapfrog over the advanced economies. We will soon have virtually ubiquitous financial inclusion, through the phone, and we’ll be leading the way on regulatory systems.

From U.S. big banks to regulators and advocates:

We need to modernize the Community Reinvestment Act. It was written forty years ago when banking was done through physical branches. Now we can serve lower-income consumers and businesses better with mobile services. Give us CRA credit for doing so.

From fintechs to banks and regulators:

Banking has always embraced technology and innovation, and it’s tempting to view today’s changes simply as further evolution. Partly that’s right, but mostly, today’s technology is different.  Past innovation was mostly about automating processes that had been designed in the analog era. It accelerated traditional activities that were originally paper-based, essentially by adding a layer of automation on top of them. Digital technology sets aside the old process and starts fresh, achieve the goal by leveraging data, machine learning and artificial intelligence. It’s truly new. Better, and cheaper.

From fintechs and banks to regulators:

Let us move into the cloud. It’s not less secure -- it’s more secure, if done right. It’s also less expensive, enabling more financial services that can serve more people affordably.

From banks to regulators:

Consider how you can help the industry bite the bullet on modernizing our IT. Most banks have old systems, often accumulated through long-ago mergers and acquisitions that were never deeply integrated. Some of it uses programming languages no longer taught in college -- and our cadres of experts will retire before long. The seams between these systems are full of problems, from security risks to compliance mistakes. Furthermore, we can’t readily use our own data, which we’ll have to do to compete. Fixing this is expensive. What’s the best regulatory environment to move toward a new system?

From regtech firms to everyone:

Some regulation could be issued in the form of computer code. It could be not only machine-readable, but machine executable -- self-implementing. This could drastically cut both costs and risks. Of course this new regulatory model would not work for everything, but where it fits, it could be introduced gradually and voluntarily. Meanwhile regulators should build data portals allowing firms to connect directly through API’s that enable real time, full-data monitoring for signs of problems or trends needing human review. Sampling-based risk review is a relic of the days when full data was hard to get and analyze. Now risks can be detected early, system-wide, and even prevented. This approach, too, could be introduced gradually and be optional for the industry, so policymakers would not have to force it on the whole system at once. Early adopters might be fintechs and community banks with relatively simple products. Maybe this kind of monitoring could have prevented the subprime meltdown and financial crisis.

From innovators to regulators:

Start small. You will need reglabs or sandboxes as test beds to see how innovations perform, in safe environments where customers can’t be hurt and systems aren’t threatened. Look at how the UK’s Financial Conduct Authority is doing regtech “tech sprints,” gathering policymakers, industry and academics in “hackathons” to fashion new approaches in areas like regulatory reporting and digitizing the rule book. Progress requires collaboration across the ecosystem, to try things out and learn fast.

From the tech world to policymakers:

If you have an important problem that’s always been unsolvable, either because people disagree on the solutions or just due to the nature of the issue, consider whether today’s technology can fix it, or at least make a big dent. Again, new technology really is different. It’s not a panacea, and of course it creates some new problems. Still, we can use it to meet huge challenges, including some we’ve traditionally attacked through regulation and public policy, often with poor results. In finance, we can achieve full financial inclusion. We can make it easy for people to manage their financial lives in healthy ways. We can improve regulatory outcomes and reduce costs, at the same time. We can start winning the wars on terrorism, illegal drugs, and human trafficking by actually catching the laundering. We need to come together to do these things, and much more.

For myself, I’m starting into 2018 excited about all these issues. I’ll be tackling financial crimes through Hummingbird and helping foster financial inclusion and health through BIG and also continuing to chair the boards of CFSI and the newly-formed FinRegLab, which will be conducting empirical research on financial innovation. I’ll look forward to working with all of you in the new year!

Recent Events

Recent Podcasts

In case you missed it from last month's newsletter, I had great fun turning the tables to be the podcast guest of Lou Carlozo on the BAI’s great show: BAI podcast: The Unstoppable Rise of Regtech. Listen and enjoy!

Upcoming Events:

  • OCC Bank Information Technology Conference, January 9-12, Washington, DC

  • Innovate Finance Global Summit, March 19-20, London, UK

  • Texas Bankers Association Annual Conference, May 3, Houston, Texas

  • Comply 2018, May 16, New York

This month’s must-reads:

Be sure to follow me on twitter and facebook.  As always, check the website for more updates. Most importantly, keep innovating!

Jo Ann


Mallory Kwiatkowski

A short post this month, as I’m in the midst of an intensive “world tour” speaking on fintech and regtech. In November and December I’m doing three trips to Europe, three to Asia, and one to Africa (if we can sort out the logistics!). I had to decline another in Asia to get home for Christmas. And between international travels, I’m also speaking at U.S. conferences in Washington and New York.

Each event is distinct, but collectively they’re a global mosaic of fintech and regtech activity. Several dimensions stand out.

Focus:  Many of these gatherings are on regtech only. That’s new. A year ago, regtech events were rare, and pretty much nonexistent in the U.S. Now, over just two months, I’m speaking at three dedicated regtech events, at the “regtech day” of several fintech conferences, and on “regtech panels” at others. Regtech is roaring into our lives.

Audience: Most of these events draw broad audiences, but a big subset are for the regulators themselves. Financial regulatory bodies worldwide are grappling, together, with the novel opportunities and challenges arising from innovation. How can it grow their economies? How should should they regulate fast-growing mobile financial services, especially in the developing world? What are the challenges -- and what’s the right role for government -- in consumer protection, financial inclusion, cyber-security, identity authentication, anti-money laundering, crypto-currencies, ICO’s, shifting competition models, protecting systemic stability, and building modernized, inter-operable payments systems?

Size: The Monetary Authority of Singapore grew its Fintech Festival from about 13,000 people last year to an estimated 30,000 this month. The tagline called it the “world’s largest fintech conference,” but surely it’s the world’s largest financial event of any kind. People came from all over the world, attesting both to the rise of fintech as a powerful new global sector, and also to Singapore’s remarkable leadership in remaking financial regulation. This is not a remote effort by one country. It’s part of a robust, integrated global dialogue among regulators and industry, aimed at profound change that will eventually affect every financial company. For more on the MAS vision, here’s my podcast from last spring with its fintech head, Sopnendu Mohanty.

Worth noting:  this enormous fintech “festival” was sponsored not by a trade group and not by a conference company...but by a central bank.

Here are my events:

Speaking of regtech, I had great fun turning the tables to be the podcast guest of Lou Carlozo on the BAI’s great show:  BAI podcast: The Unstoppable Rise of Regtech. Listen and enjoy!

New podcasts:

This month’s must-reads:

Other upcoming events (in addition to those listed above):

  • OCC Bank Information Technology Conference, January 9-12, Washington, DC

Be sure to follow me on twitter and facebook.  As always, check the website for more updates. Most importantly, keep innovating!

Jo Ann

Money 20/20

Mallory Kwiatkowski

This year’s Money 2020 was spectacular -- about 11,000 people packed into the huge Venetian conference venue in Las Vegas, teeming with energy and ideas. As I said last month, financial people should attend Money 2020 just to absorb the enormity of the change happening where finance meets technology.

The organizers innovated this year by adding emcees for the thematic tracks, including me for the regulatory afternoon (take note for next year: this is always on the first day --  Sunday!).  To my eye, our audience seemed double the size of last year’s. It seems regulation is becoming central to innovation, and vice versa! We had brilliant speakers on all the hot topics. (Watch for upcoming podcasts with three panelists -- Financial Services Roundtable CEO Tim Pawlenty, NerdWallet CEO Tim Chen, and Chris Woolard, who leads strategy for the UK Financial Conduct Authority and shared the first set of results from their famous Regulatory Sandbox.)

The best moment came at day’s end. Past attendees had asked for more interaction with regulators, so Money 2020 set up a town hall. They invited all the current regulators who spoke at the conference, plus several key past ones. I think it was a bit of a surprise, but...everyone said yes.

As a result, we had nine -- count them! --  current and former regulators on the stage for the final session. I was out in the audience playing the Oprah role, so I never got a photo, but it was a powerful visual image. The stage crew had to do a quick makeover to squeeze in smaller stools that could fit everyone in. We had two former Comptrollers of the Currency -- Eugene Ludwig and Thomas Curry. We had the heads of innovation for the CFPB (Dan Quan), the SEC (Ryan Van Grack), and the CFTC (Dan Gorfine). We had senior innovation leaders from the OCC (Amy Friend) and the FTC (Duane Pozza). We had the former financial commissioner of the state of New York (Benjamin Lawsky). And we had Christopher Woolard from the UK -- representing the rest of the world.

Something that struck me, and others who commented later, was how candid they all were, and also how collegial.  It was clear, watching them, that some of these people know each other well and that the conversation on stage mirrored a larger one they’re already having. I doubt this chemistry was there, so strongly, a year ago. The change bodes well for regulatory collaboration -- which is essential for faster, smarter, and of course, more consistent policy-making as these agencies grapple with the novelty and breathtaking speed of technology change. I finished the day feeling hopeful.

My other Money 2020 highlight was that Hummingbird Regtech, of which I’m cofounder, was selected to pitch in the startup contest. We didn’t win -- the winner was Steady -- but we generated tremendous interest. CEO Matt Van Buskirk and COO Joe Robinson made a powerful presentation on the harm caused by financial crime, the inadequacy of today’s tools for catching it, and the opportunity to transform the whole space with new technology. We were flooded with inquiries and are excited about next steps.

I’m writing this post (a bit late) from Heathrow Airport in London, after the first stop in a seven-country world tour I’m doing on fintech and regtech between November 1 and December 21. Coming off Money 2020 last week and a Ripple blockchain conference for central banks in New York on Monday, I’ll be speaking at three events in Europe, three in Asia and one in Africa (plus three in Washington and New York), over seven weeks. About half of these events are on regtech or for regulator audiences -- a cross-section of the global scene on  innovation.

I’ll share a few highlights as I go -- I’m trying to post quick video clips from each spot on Twitter and LinkedIn. Plus, I’m getting some amazing podcasts.

New podcasts

Upcoming events

This month’s must-reads:

Be sure to follow me on twitter and facebook.  As always, check the website for more updates. Most importantly, keep innovating!

Jo Ann

My learning hacks

Mallory Kwiatkowski

I’m speaking this fall to thousands of people at conferences. When the audience is bankers, lawyers, regulators, or advocates, the most common question I hear is, how can I learn more about technology?  

No one lacks for interesting articles and whitepapers -- my laptop is practically smoking with them -- but people want the secrets to learning fast, or even just where to start. They need what techie people call a hack -- a trick, a shortcut, a method.

Here are my tech learning hacks. Apologies in advance to all the great sources I’m omitting. Dawn is brightening the window of my hotel room during a travel marathon this week that involves five speeches in four days in four cities. That’s my excuse for leaving out some favorites!

What to read?

Wired Magazine and Fast Company. Fintech is more tech than fin, in the forces that drive it. To understand them, the quick, easy, fun solution is reading Wired every month.

Online, try Engadget and The Verge.

Where to go?

Tech conferences. Tech content and style are seeping into banking events, but tech and nontech gatherings are still different animals. My first foray to a tech conference was Finovate New York, five years ago. In one day, I learned more -- consciously and probably subconsciously -- than I would have absorbed in a year of reading. Or maybe ever. Finovate runs in New York, San Francisco, London, Asia and the Middle East every year.

The single best conference for rapid learning is Money 2020. First-timers learn just by seeing it - how huge it is (11,000 people) - and feeling the pulsing energy. People who thought fintech was about kids with startups suddenly find all the world’s biggest banks, financial firms, tech firms and media, in an event that’s orders of magnitude bigger than their usual conferences.  Come this year-- it starts October 22 in Las Vegas -- and don’t skip Sunday, which has a special morning AI session, a speech by Steve Wozniak; and then yours-truly emceeing a terrific regulatory track
that includes a town hall with -- count them -- nine current and former regulators.

If you really want to immerse in exciting tech, go also to SouthBySouthwest (SXSX, called “South By”) in Austin in March. It’s even bigger than Money 2020 and is way broader than finance, but with great financial content included.

For tech aimed at financial inclusion, the must-event is the Center for Financial Services Innovation’s Emerge conference. For lending, all the LendIt events are wonderful.

If you’re in Asia, go the Monetary Authority of Singapore’s enormous fall Fintech Festival. There’s nothing like it. If you’re in London, well, you’re lucky. Fantastic events, all year. I'm speaking at two this fall, see below.

Source Media Regtech

I’m not saying these conferences are better than others. I’m saying, they are packed with fast learning about technology.

Who to follow?

Here is where I’ll really get in trouble for omitting fantastic people. I’ll just do three favorites.

Brett King’s radio show and everything he writes

Chris Skinner’s daily blog


Who to query?

Young techie people. I’ve learned more about tech from millennials than all my baby boomer peers combined.

Other reading?

I posted a blog on suggested books when I moved to Boston for my Harvard fellowship. They’re all still great.

What to try?

Personal technology! Be an early adopter. Don’t cling to old devices and software. Get Alexa or Google Home. Try new apps. Leave your comfort zone.

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This month’s photo is me with my Xbox gear. I’m not a gamer, but four years ago I began using an Xbox to control my home media activities -- with my voice. I had to dust off the controller to take this photo, instead of just talking to the TV.  Learning, all the time.

New podcasts

Upcoming events

This month’s must-reads:

Be sure to follow me on twitter and facebook.  As always, check the website for more updates. Most importantly, keep innovating!

Jo Ann

Regulatory Change

Mallory Kwiatkowski

I recently had dinner with a small group of thoughtful people from the worlds of finance and fintech. Our host posed the question suggested by Peter Thiel in his book Zero to One: What strongly-held opinion do you have that no one else agrees with?

When my turn came, I offered two. First, I said I think technology can solve all the problems people have with their financial lives, other than lack of money. Most people don’t see that yet (I believe they will, if we get the regulation right). However, some people do, including some at the dinner.

On my second point, though, I think I might have been alone. I said I believe regulators can change. I said they can change fast enough and well enough to do a good job addressing the technology transformation underway in finance.

That one produced skeptical murmurs and laughs and then lively debate. People immersed in technology just flat find this hard to believe.

However, I not only believe it. I know it.  

There are two reasons why I’m sure. The first is, regulators don’t have the option not to change. Technology is revolutionizing finance. It’s not waiting for our regulatory systems to be ready for it. It’s just coming. It’s bringing issues that are mold-breaking and novel, but the even bigger challenge is the speed. No one can keep up with these trends, let alone know how they will impact financial markets and customers. In the face of such uncertainty, the natural human tendency is to wait for clarity. However, traditional clarity won’t materialize, at least not in time. Slow regulatory systems will increasingly fail. Sometimes holding still is the riskiest choice.

Policymakers are smart. They will figure how to move faster, because they’ll have to.

The second reason I’m sure this will happen is because it already is happening. We already have visionary and even courageous leaders, globally and increasingly in the U.S., who understand the importance of this moment and are moving to optimize it -- to enable desirable change and to contain new risks. I’ve been a bank regulator, and I’ve worked with them my whole life. Today, almost every day, I talk with regulators who sound like none I’ve ever known before. And their ranks are growing. Again, they’re smart. They love their work. They will do it well, which means they will get better at rapid change.

This month’s solar eclipse was a cosmic rarity, and also a social one as it briefly united the country. Much of the unity was tech-enabled. My brother had traveled to the totality in Oregon (the totality -- I love how that word, with its resonant power, entered our vocabulary). Steve began live-texting the eclipse to our far-flung family, and then we all shared it with each other, all day. Since the beginning of time, a solar eclipse has been experienced by each human as something that happens in one time and in one place. This eclipse, suddenly, transcended that. We shared it, live, because we have cell phones and phone cameras and social media -- ubiquitous, hand-held, instant, multi-media connection with each other. There was no lag. We didn’t have to wait for photos in tonight’s TV or tomorrow’s newspaper; we didn’t have to check the mailbox next week to see if there’s a letter from our brother. We experienced it together, in real time, as a single event.

This is going to happen with regulation. Information and insight that now live inside separate systems and travel slowly, in constricted channels and in fragments -- these are going to connect. They’re going to move onto platforms. This will enable both regulation and compliance to learn fast, learn continuously and learn well. It will thus become ever more smart and agile.

Problems will abound, of course. Sometimes, yes, we will move too fast. It obviously won’t be perfect. But if we do it right, it will be far better than what we have now.

I’m sure of it.

What do you think? Share a comment!

New podcasts

Upcoming events

This month’s must-reads:

Be sure to follow me on twitter and facebook.  As always, check the website for more updates. Most importantly, keep innovating!

Jo Ann

New Generation

Mallory Kwiatkowski

This month my daughter and son-in-law had their first baby.

Holding a newborn makes you long for a better world. We can’t know what the future holds overall, but I do know one thing:  Christopher’s generation will do better than any before in one realm of life  -- finance.

When I started my fellowship at Harvard, a colleague introduced me to academic work on “wicked” problems, meaning problems so complex that they seemingly cannot be solved. Consumer financial health has always been one of these. Rich or poor, young or old, healthy or hurt, elite or outcast, everyone has a financial life. Everyone takes money in, pays it out, and hopes to save and maybe borrow. Throughout history, many people have struggled to do these simple tasks, unable to access and afford mainstream services, and/or harmed by the services they use or how they use them. For decades, even centuries, we’ve tried to solve this wicked problem mainly by regulating finance. For many people, we’ve largely failed.

Today, technology is solving it for us. For everyone...

Technology has begun to convert consumer financial ill-health from a huge wicked problem to a marginal one. It’s making it possible for everyone, from every station in life, to manage their money in ways that help them thrive. It’s bringing low-cost services to every corner of the earth through mobile phones; new data for inclusive but sound underwriting; new ways to prove identity; simple and transparent products; micro-payments; easy, automatic budgeting, saving, and financial management; personal (robot) financial advisors for all; reminders to do what we should; help with resisting temptation; armor against scams, and much more. All this is coming in fits and starts, with failures and problems and hard-won lessons along the way, but it is coming, this is certain. It’s being driven by technology trends much bigger than finance, like mobile technology, big data, artificial intelligence, blockchains, and voice interface.

Correction:  it’s coming for sure...if we regulate it right. Policymakers need to allow good innovation to emerge, and also block new risks coming with it.

That won’t be easy. The challenges are novel, and they’re coming very fast, and on multiple fronts. And regulatory change is always hard, tangled up with politics, traditional cultures, well-motivated carefulness, and in the United States, fragmented agency structures. Making regulation effective and efficient is a wicked problem, in itself.

This is what we need to work on. We need regulation innovation, that’s smart about fintech and that adopts regtech.

We need a new generation of financial policy.

Other updates

On June 30 I finished my senior fellowship with the Harvard Kennedy School Mossavar-Rahmani Center for Business and Government. I was there for two years, writing a book on financial innovation and regulation. I’m still working on it  (my subject matter is a moving target), but will publish a paper on my research and recommendations.

“Fellowship” is a perfect word for my Harvard experience. I’ve moved back to Washington, but cherish my connections with the other fellows, the students, faculty and staff, and the university community. It brought learning and inspiration, every day.


New podcasts

Upcoming Events

As always, check the website for more updates, and keep innovating -- for that new generation!

Jo Ann

Be sure to follow me on twitter and facebook.


Mallory Kwiatkowski

June has been regtech month.

People use the “regtech” term in two ways. There is regtech for regulators, and there is regtech that transforms industry compliance. If we develop it right, the two will gradually merge into something unimaginable today -- regulation that simultaneously improves public policy outcomes, and slashes costs.

On June 1, I hosted a regtech roundtable at the Harvard University Center for Business and Government in the Kennedy School for Government. We aimed for 30 people and ended up with 50 people coming from all over the world to grapple with the question: Can technology redesign regulation? The event cross-pollinated thinking between two groups: financial regulatory experts who are not deep in technology, and technology experts who don’t work with regulation. We posited that regulators know they have a problem -- the difficulty of making regulation effective and efficient -- and think it can’t really be solved. The tech group, meanwhile, has the solution, but doesn’t know about the problem, or thinks it isn’t interesting. As the two groups combined, exciting ideas began to form.

At one point, I asked for a show of hands of participants who know how to write computer code, and then participants who have written laws or regulations. The overlap was minuscule -- it may even have been zero. Perhaps, however, some regulations should be issued as code. Maybe some should be issued in the regulatory equivalent of an app store, requiring compliance systems to meet standards while permitting more agile compliance.

The theme continued all month. I moderated the first-ever regtech panel at theCFSI Emerge Forum in Austin, and at the ABA’s Regulatory Compliance Conference in Orlando. The latter was with Gene Ludwig and Alistair Rennie of Watson Financial, one of many regtech firms springing up to bring better data and artificial intelligence to compliance tasks like Anti-Money Laundering.

I ended the month hosting my own annual summer roundtable, where these themes dominated once again. How can regulators use data, machine learning, and blockchains to get to win/win outcomes with better, cheaper regulation? How can we create “explainable AI”? How can we assure that new approaches have “computational integrity,” and that they don’t enshrine and bury illegal bias? There is a lot of work ahead. I think we’ll do it though. As a former regulator, it’s clear to me, that the current system cannot manage the risks ahead. The changes are too massive, and moving too fast, to regulate the old way.

I also joined two international regtech groups that launched in June. Both the RegTech Council (RTC) and the International RegTech Association (IRTA) are based in Europe and are tackling the fast-emerging need for better collaboration, communication, and consistency on a global scale. Over in the U.S. we have the new RegTechLab. Venture capital is flowing into regtech startups, and regtech conferences are springing up daily both in the US and throughout the world. The developing world is prioritizing regtech to build financial inclusion through mobile phones. In short, it’s big.

The technology already exists to make regulation better. We just have to figure out how to do it, and then figure out how to get from here to there in our political and economic framework.

One more thing: At my summer roundtable, I asked if the U.S. can and should create a testing capability for regulatory change. Call it sandboxes, greenhouses, or labs -- do we need a way to test and study changes on a small scale before forcing them on the whole system, especially in novel areas involving data and technology. I think the vote was unanimous: We do.

Exciting Podcasts Out This Month:

Upcoming Events:

As always, check the website for more updates -- and keep innovating!

Jo Ann

Be sure to follow me on twitter and facebook.

Financial Health

Mallory Kwiatkowski

My high point for May has been becoming chair of the board of CFSI -- the Center for Financial Services Innovation.

CFSI’s founder and chief executive is Jennifer Tescher. She’s now my good friend, but I vividly remember the first time I saw her.  We were at a small roundtable in California, an event where I was a veteran and she was a first-timer. I initially assumed that CFSI was a consumer advocacy group, but as Jennifer began to talk, I realized it was a new kind of mission-driven non-profit. She said things I’d never heard before from an advocate -- or anyone at all -- in all my years of working with consumer inclusion and protection. She spoke about using technology to solve consumers’ financial problems. She defined those problems in terms that transcended lack of income or lack of banking services. She even described making venture investments in startups that were building new financial products.

Through my whole career, policymakers have worked from an implicit assumption that financial inclusion is a regulatory issue, needing solutions like the Community Reinvestment Act. Suddenly, someone had new ideas. And these ideas were built on entrepreneurial energy and technology. In a word, on innovation.

CFSI is unique in how it blends research, convening power, thought leadership, and fostering of cutting-edge innovation. It has a membership network. It runs the Finlab, a fintech accelerator funded by JPMorgan Chase that is already producing successful companies. It conducts research, including the landmark US Financial Diaries study, which has just become a book.  It spun off the impact venture fund Core Innovation Capital. It invented and runs FinX, which will come to any group and help participants experience, on the ground, how marginalized consumers navigate the financial system.

The Diaries and other research are reframing how we think about financial inclusion by identifying a crucial dimension of the problem, namely volatility. Millions of Americans are living within their means -- they spend less than they earn -- but can’t rely on mainstream financial services because their incomes and expenses are volatile. They struggle with cash-flow timing problems that require, today, use of high-cost products like payday loans, deposit overdrafts, and check-cashing. Millions spend hours each month driving around town to pay bills on the exact due dates, because cash gets credited without the lags that permeate our payments system. (See Lisa Servon’s book, The Unbanking of America, and also the important new paper by my Harvard colleague Todd Baker.)

Several years ago, these insights led CFSI to reframe its mission from focusing on financial inclusion and the “underbanked” to a strategy of building financial health. The good news is that today’s innovators are attacking every problem in this complex system. It’s becoming possible to equip everyone to lead a healthy financial life, regardless of their income or situation.

I now sit at the CFSI board table in the place once held by our founding chair (and former OTS Director) Ellen Seidman.  I’m awed by the vision of Jennifer, Ellen, and the other founding directors and staff who saw how innovation could transform people’s financial lives, more than a decade before we even had the word “fintech.”

I hope you’ll get involved with CFSI. Please visit the website for a wealth of material, resources, networking opportunities and ideas, and also come next month to the Emerge Financial Health Forum in Austin. I’ll be there, along with hundreds of innovators in fintech, banking, finance, nonprofits, academia, and government, exploring new solutions.

Here are my past podcasts with CFSI:  JenniferCore CEO Arjan Schutte, and the Finlab. I’ll do one soon with Rachel Schneider on the US Financial Diaries book.  

Also coming up shortly, is a podcast with the great Brett King, another fellow CFSI board member. As a matter of fact, I’ll share my very fun appearance this week on Brett’s Breaking Banks Radio show.

Updates and Upcoming Events:

As always, check the website for more updates -- and keep innovating!

Jo Ann

Be sure to follow me on twitter and facebook for live coverage of these exciting events!