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

Regulatory Change


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.

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Jo Ann