[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


 DISRUPTER SERIES: IMPROVING CONSUMERS' FINANCIAL OPTIONS WITH FINTECH

=======================================================================

                                HEARING

                               BEFORE THE

        SUBCOMMITTEE ON DIGITAL COMMERCE AND CONSUMER PROTECTION

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 8, 2017

                               __________

                           Serial No. 115-36
                           
                           
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                    COMMITTEE ON ENERGY AND COMMERCE

                          GREG WALDEN, Oregon
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
TIM MURPHY, Pennsylvania             ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas            GENE GREEN, Texas
MARSHA BLACKBURN, Tennessee          DIANA DeGETTE, Colorado
STEVE SCALISE, Louisiana             MICHAEL F. DOYLE, Pennsylvania
ROBERT E. LATTA, Ohio                JANICE D. SCHAKOWSKY, Illinois
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas                    JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia     PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida            YVETTE D. CLARKE, New York
BILL JOHNSON, Ohio                   DAVID LOEBSACK, Iowa
BILLY LONG, Missouri                 KURT SCHRADER, Oregon
LARRY BUCSHON, Indiana               JOSEPH P. KENNEDY, III, 
BILL FLORES, Texas                   Massachusetts
SUSAN W. BROOKS, Indiana             TONY CARDENAS, California
MARKWAYNE MULLIN, Oklahoma           RAUL RUIZ, California
RICHARD HUDSON, North Carolina       SCOTT H. PETERS, California
CHRIS COLLINS, New York              DEBBIE DINGELL, Michigan
KEVIN CRAMER, North Dakota
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia

                                 7_____

        Subcommittee on Digital Commerce and Consumer Protection

                         ROBERT E. LATTA, Ohio
                                 Chairman
GREGG HARPER, Mississippi            JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BEN RAY LUJAN, New Mexico
MICHAEL C. BURGESS, Texas            YVETTE D. CLARKE, New York
LEONARD LANCE, New Jersey            TONY CARDENAS, California
BRETT GUTHRIE, Kentucky              DEBBIE DINGELL, Michigan
DAVID B. McKINLEY, West Virgina      DORIS O. MATSUI, California
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
GUS M. BILIRAKIS, Florida            JOSEPH P. KENNEDY, III, 
LARRY BUCSHON, Indiana                   Massachusetts
MARKWAYNE MULLIN, Oklahoma           GENE GREEN, Texas
MIMI WALTERS, California             FRANK PALLONE, Jr., New Jersey (ex 
RYAN A. COSTELLO, Pennsylvania           officio)
GREG WALDEN, Oregon (ex officio)

                                  (ii)
                             
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Robert M. Latta, a Representative in Congress from the State 
  of Ohio, opening statement.....................................     1
    Prepared statement...........................................     3
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     3
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     5
    Prepared statement...........................................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     6
    Prepared statement...........................................     7
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, prepared statement.............................    78

                               Witnesses

Jeanne M. Hogarth, Vice President, Center for Financial Services 
  Innovation.....................................................     9
    Prepared statement...........................................    12
Javier Saade, Managing Director, Fenway Summer Ventures..........    27
    Prepared statement...........................................    29
Christina Tetreault, Staff Attorney, Consumers Union.............    32
    Prepared statement...........................................    34
Peter Van Valkenburgh, Director of Research, Coin Center.........    45
    Prepared statement...........................................    47

                           Submitted Material

Statement of the Electronic Transactions Association, June 8, 
  2017, submitted by Mr. Costello................................    79
Letter of June 8, 2017, from John Berlau, Senior Fellow, 
  Competitive Enterprise Institute, to subcommittee members, 
  submitted by Mr. Costello......................................    81
Statement of Kaspersky Lab, June 8, 2017, submitted by Mr. 
  Costello.......................................................    92
Statement of Intuit, by Bernard F. McKay, Chief Public Policy 
  Officer and Vice President, Corporate Affairs, June 8, 2017, 
  submitted by Mr. Costello......................................    95

 
 DISRUPTER SERIES: IMPROVING CONSUMERS' FINANCIAL OPTIONS WITH FINTECH

                              ----------                              


                         THURSDAY, JUNE 8, 2017

                  House of Representatives,
     Subcommittee on Digital Commerce and Consumer 
                                        Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2123, Rayburn House Office Building, Hon. Robert Latta 
(chairman of the subcommittee) presiding.
    Members present: Representatives Latta, Harper, Upton, 
Lance, Guthrie, McKinley, Kinzinger, Bilirakis, Bucshon, 
Mullin, Costello, Walden (ex officio), Schakowsky, Clarke, 
Cardenas, Green, and Pallone (ex officio).
    Staff present: Blair Ellis, Press Secretary/Digital 
Coordinator; Melissa Froelich, Counsel, Digital Commerce and 
Consumer Protection; Adam Fromm, Director of Outreach and 
Coalitions; Jay Gulshen, Legislative Clerk, Health; Bijan 
Koohmaraie, Counsel, Digital Commerce and Consumer Protection; 
Paul Nagle, Chief Counsel, Digital Commerce and Consumer 
Protection; Hamlin Wade, Special Advisor for External Affairs; 
Michelle Ash, Minority Chief Counsel, Digital Commerce and 
Consumer Protection; Jeff Carroll, Minority Staff Director; 
Lisa Goldman, Minority Counsel; Caroline Paris-Behr, Minority 
Policy Analyst; and Matt Schumacher, Minority Press Assistant.
    Mr. Latta. Well, good morning. I'd like to call the 
Subcommittee on Digital Commerce and Consumer Protection to 
order, and the Chair now recognizes himself for 5 minutes for 
an opening statement.

OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Again, good morning, and welcome to our witnesses today. We 
are very glad to have you with us today.
    Today, we continue the Disrupter Series examining FinTech 
and all the ways that entrepreneurs and established businesses 
are looking to give consumers more tools and control over their 
finances.
    Families across the country strive to achieve financial 
independence and stability. Many no longer feel certain that 
their children will be better off than they were at their age, 
a change from just a few years ago.
    Understanding how new technology can assist families in 
managing their finances, especially while on the go, is a 
conversation we need to have.
    Improving consumers' financial options is a clear example 
of the new technology pushing and disrupting established 
industries.
    While we must focus on protecting the consumers, it is also 
important that we keep an eye on what matters to the consumer--
what are their goals, what motivates them to use one service 
over another.
    How can we encourage innovation while keeping the consumer 
protection bar high? In this conversation about improving 
access to commerce it is important to remember that there are 
generally three relationships people have with traditional 
institutions.
    People have access to all the traditional financial 
services; second, the underbanked who have a checking account 
and maybe a savings account but also use alternative financial 
services like rent-to-own services or auto title loans; and 
third, the 7 percent of Americans who are unbanked, who do not 
have a checking or savings account and how use alternative 
services.
    There are a number of statistics demonstrating how large 
the opportunity is to reach more Americans with relevant 
services. Twenty percent of the U.S. population--over 60 
percent of Americans--are underbanked or unbanked.
    Sixty-four percent of Americans earning less than $30,000 
per year own a smart phone, and finally, over $12 billion were 
invested in FinTech companies in 2016.
    Increasingly, Americans are turning to online and mobile 
banking, according to a 2015 study from the Federal Deposit 
Insurance Corporation. Over 31 percent of Americans used mobile 
banking and that number has likely risen in the last 2 years.
    There are tremendous opportunities for companies to reach 
consumers with new products to help them create a rainy day 
fund for the first time, securely pay their mortgage, rebuild 
their credit budget, manage multiple income streams and invest 
their earnings.
    One of the first questions that come to mind in any 
conversation about money is security. Cybersecurity is an 
ongoing challenge and one the Energy and Commerce Committee is 
tackling head on.
    At this time, one of our other subcommittees in the Energy 
and Commerce is getting ready to start a hearing focused on 
healthcare cybersecurity.
    In this subcommittee we have discussed how cybersecurity 
plays in development and life cycle of a number of connected 
devices through the Disrupter Series.
    While there is no silver bullet, we do need to keep 
cybersecurity at the top of our minds because if consumers do 
not trust the products and services they use are secure then 
they will not use them.
    I would like to thank our witnesses for joining us today 
and I look forward to your perspectives on how we can ensure 
that innovation in the FinTech space continues in the United 
States, how innovation can improve consumer protection and how 
the regulatory environment has impacted innovation.
    Again, I want to thank all of our witnesses for rejoining 
us today for this very important discussion that we will have.
    [The prepared statement of Mr. Latta follows:]

               Prepared statement of Hon. Robert E. Latta

    Good morning and welcome to the Digital Commerce and 
Consumer Protection subcommittee hearing. Today we continue the 
Disrupter Series examining FinTech and all of the ways that 
entrepreneurs and established businesses are looking to give 
consumers more tools and control over their finances.
    Financial independence and stability is the goal for so 
many families across this country. People no longer feel 
certain that their children will be better off than they were 
at their age--a change from just a few years ago. Understanding 
how new technology can be leveraged responsibly to give people 
on-the-go control over their finances is a critical 
conversation.
    Improving consumer's financial options is a clear example 
of where new technology is going to push and disrupt 
established industries. As much as consumer protection is 
focused on protecting, we also need to keep our eye on the 
consumer too. What are their goals? What motivates them to use 
one service over another? How can we encourage innovation while 
keeping the consumer protection bar high?
    In this conversation about improving consumers access to 
commerce, it is important to remember that there are generally 
three relationships people may have with traditional 
institutions:
     People who have access to all of the traditional 
financial services;
     The underbanked, who have a checking account, and 
maybe a savings account, but also use alternative financial 
services like rent-to-own services or auto title loans; and,
     The 7 percent of Americans who are unbanked--who 
do not have a checking or savings account and only use 
alternative services.
    There are a number of statistics demonstrating how large 
the opportunity is to reach more Americans with relevant 
services:
     20 percent of the U.S. population, over 60 million 
Americans, are underbanked or unbanked.
     64 percent of Americans earning less than $30,000 
per year own a smartphone.
     Finally, over $12 billion was invested in FinTech 
companies in 2016.
    Increasingly Americans are turning to online and mobile 
banking. According to the most recent study from the FDIC 
(Federal Deposit Insurance Corporation), over 31 percent of 
Americans use mobile banking and that number has likely risen 
in the last 2 years.
    There are serious opportunities for companies to reach 
consumers with new products to help them create a rainy-day 
fund for the first time, make faster more secure payments, 
rebuild their credit, budget and manage multiple income 
streams, and invest.
    One of the first questions that comes to mind in any 
conversation about money is security. Cybersecurity is an 
ongoing challenge, and one the Energy and Commerce Committee is 
tackling head on. Upstairs, our sister subcommittee is getting 
ready to start a hearing focused on health care cybersecurity. 
Throughout the Disrupter Series, we have discussed how 
cybersecurity plays into development and the lifecycle of a 
number of connected devices. There is no silver bullet. We need 
to keep cybersecurity top of mind, because if consumers do not 
trust that the products and services they use are secure, then 
they will not use them. Plain and simple.
    I would like to thank our witnesses for joining us today 
and I look forward to your perspectives on:
     How we can ensure that innovation in the FinTech 
space continues in the United States,
     how innovation can improve consumer protection, 
and
     how the regulatory environment has impacted 
innovation.
    Thank you all for joining us today for this important 
discussion.

    Mr. Latta. And at this time, I'd like to recognize the 
gentlelady from Illinois, the ranking member of the 
subcommittee for 5 minutes for an opening statement. Good 
morning.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Good morning. Thank you, Mr. Chairman.
    Today, in the subcommittee, we are going to be looking into 
the potential to provide consumers better options through 
financial technology, or FinTech.
    On the floor this afternoon, the House will be debating 
legislation to gut existing consumer protections for financial 
products. These discussions can't happen in isolation.
    Consumers can only realize the full benefit of FinTech if 
we have reasonable safeguards in place to prevent abusive 
practices, secure personal information and protect consumers 
from fraud.
    The Financial CHOICE Act, what my Democratic colleagues and 
I call the Wrong Choice Act, puts those safeguards in severe 
jeopardy.
    One of the landmark achievements of the Dodd-Frank Wall 
Street Reform Consumer Protection Act was the creation of the 
Consumer Financial Protection Bureau.
    The CFPB is an effective consumer watchdog and it has 
returned $12 billion to 29 million harmed consumers. The Wrong 
Choice Act would gut this critical consumer watchdog. It would 
make it harder for the CFPB to take action to protect 
consumers.
    It would threaten the CPB's funding. It would specifically 
block the CFPB from pursuing consumer protections in areas like 
payday lending and it would block the CFPB's proposed rule 
limiting arbitration to ensure that consumers can defend their 
rights in court.
    Who benefits? Not consumers. Not responsible businesses. 
The winners are big banks like Wells Fargo that open up 
fraudulent accounts for their customers, pay lenders that trap 
consumers in unaffordable debt, credit card companies that 
engage in deceptive practices, for-profit colleges that prey on 
veterans and reverse mortgage companies that put seniors' homes 
at risk.
    The CFPB has proven time and time again that it is a 
research and data-driven agency. It has been actively engaged 
in exploring how FinTech can be part of consumer-friendly 
innovation.
    In October, the CFPB released its Project Catalyst Report 
on Innovation in Financial Services. The report highlighted the 
tremendous potential for FinTech to improve the lives of 
Americans. It also emphasized the importance of building 
consumer protections into new innovations from the outset.
    Effective protections need to be flexible enough to apply 
to new financial products. That's precisely what the CFPB did 
in its rule for prepaid products.
    It requires protections against fraud and unauthorized 
charges as well as basic transparency regarding fees and 
balances.
    The rules apply to both physical prepaid cards and mobile 
wallets because consumers deserve strong protections whether 
they are swiping cards or using smart phones.
    I believe the CFPB's valuable work should continue. I 
choose consumers over unethical companies that engage in 
unfair, deceptive and abusive practices.
    I will be voting against the Wrong Choice Act this 
afternoon. If my colleagues really care about providing quality 
financial options for American consumers, they will do the 
same.
    With proper protections baked in, I believe FinTech will 
have great benefit for consumers. It provides new opportunities 
to reach the unbanked and underbanked households. FinTech 
companies have already made it easier than ever to make person-
to-person payments.
    We will be hearing much more from our witnesses about some 
of the specific innovations that FinTech companies are working 
on.
    And as with other topics in our Disrupter Series, the 
policy challenge for this subcommittee to consider is how we 
adapt today's rules to tomorrow's technology.
    I look forward to hearing the insight from our panelists as 
we continue efforts to make sure consumers can truly benefit 
from the promise of new innovation.
    And I yield back.
    Mr. Latta. Thank you. The gentlelady yields back.
    At this time, the Chair now recognizes the gentleman from 
Oregon, the chairman of the full committee, for his opening 
statement. Good morning.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Good morning. Thank you, Mr. Chairman, and 
welcome to our panelists and to our guests today.
    Today's Disrupter Series takes an important look at how we 
can ensure that innovation's improving options and outcomes for 
consumers and their financial health by way of financial 
technology, more commonly known as FinTech.
    Smart phone adoption has skyrocketed in recent years which 
provides a new platform to reach consumers with basic services 
such as online banking or more complex transactions like 
mortgage applications.
    In Oregon where I come from, the percentage of people 
unbanked or underbanked is slightly higher than the national 
average.
    So if there is an opportunity to help folks engage in 
commerce, start a savings account, become more financially 
secure, we should be giving it serious consideration and 
FinTech could provide that opportunity.
    Disruption or change can be uncomfortable. But if we remain 
focused on the consumer and what is in the best interests of 
the consumer we can move forward productively.
    Startups, incumbents and partnerships are all critical 
components of this conversation. Now, ultimately we know that 
if consumers do not find something useful, they won't use it, 
given the choice.
    The reality is that consumers are demanding better, faster, 
more secure services in every industry. The growth of new peer-
to-peer payment services like PayPal and Venmo also show that 
the younger generations are quickly adopting these services and 
they will soon expect the same level of service and convenience 
for other traditional financial services as well.
    Block chain is another important component within this 
industry as it has the potential to disrupt how we transfer 
assets digitally with increased transparency and security.
    All of this is to say it's clear that the FinTech world is 
all-encompassing and is quickly growing. The United States 
should continue to be a hub for this innovation and for this 
opportunity and FinTech's rise in popularity demonstrates its 
fulfillment of both.
    So I look forward to the testimony and your comments today 
and continuing to work to increase consumers' financial options 
with FinTech.
    That is the charge this subcommittee has, among many others 
in the innovation environment, and it's ably led by our 
chairman and ranking member.
    So we thank you for being here. I will give you a heads up 
that I also have to go up to the Oversight Investigations 
Subcommittee that's meeting concurrent with this one.
    So I've got your testimony, and I appreciate your counsel 
and your input and look forward to working with you in the 
future.
    With that, Mr. Chairman, I yield back the balance of my 
time.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Good morning. Today's Disrupter Series taken an important 
look at how we can ensure that innovation is driving improved 
options and outcomes for consumers and their financial health 
with financial technology or FinTech.
    Smartphone adoption has skyrocketed in recent years, which 
provides a new platform to reach consumers with basic services, 
such as online banking, or more complex transactions like 
mortgage applications.
    In Oregon, the percentage of people unbanked or underbanked 
is slightly higher than the national average. If there is an 
opportunity to help these people engage in commerce, start a 
savings account, become more financially secure, we should be 
giving them serious consideration. FinTech provides a path 
forward.
    Disruption can be uncomfortable to talk about but if we 
keep focused on the consumer and what is in their best 
interest, we will be about to move forward productively. And we 
know that if consumers do not find something useful they will 
not use it. Startups, incumbents, and partnerships are all 
critical components of this conversation.
    Consumers are demanding better, faster, and more secure 
services in every industry. The growth of new peer-to-peer 
payment services like PayPal and Venmo also show that the 
younger generations are growing up with these services and will 
expect the same level of service and convenience for other 
traditional services as well. Blockchain has the potential to 
disrupt how we transfer assets digitally with increased 
transparency and security. The FinTech world is broad and 
growing.
    The United States should continue to be a hub for 
innovation and opportunity. I look forward to hearing from our 
witnesses about their work to increase consumers' financial 
options with FinTech. Thank you all for being here.

    Mr. Latta. Thank you very much. The gentleman yields back.
    The Chair now recognizes for 5 minutes the gentleman from 
New Jersey, the ranking member of the full committee.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. This hearing is an 
update to last Congress' hearings on mobile payments and 
digital currencies.
    Technological advances are making financial transactions 
more convenient and efficient with nine in 10 Americans 
regularly connected to the internet and over 75 percent of us 
having smart phones. Online access to banking has never been 
better.
    New financial products may help people pay and receive 
goods faster and consumers may have better and more secure 
access to their funds and these products also may help people 
have greater control over their financial lives by giving them 
more and better financial information.
    These potential benefits are important but these new 
financial products should have consumer protections attached to 
them just like protections attached to old and more traditional 
financial products.
    Consumer protections are essential and I look forward to 
hearing how we can help ensure there are appropriate safeguards 
while at the same time encouraging this new marketplace to 
thrive.
    One area that is ripe for improvement in the financial 
sector is faster payments. In this day of technological 
advancements, some Americans still have to wait days for their 
checks to clear.
    Oftentimes, these consumers are then forced into turning to 
high cost credit to access their own money.
    In 2015, the Federal Reserve created a task force to review 
the issue of faster payments and I am hoping today for an 
update on the work of that task force.
    People should be able to get real-time access to their 
money. I realize that some actors in this space such as check-
cashing companies, payday lenders or wire transfer services may 
lose out on fees if real-time access is achieved.
    However, with all of the technological advances that have 
been made delays are really not acceptable anymore and they 
have adverse effects on merchants and others waiting to be 
paid.
    A number of Federal agencies play a critical role in the 
success of financial technology including both the Federal 
Trade Commission and the Consumer Financial Protection Bureau.
    These two agencies conduct research and analysis of 
consumer financial interests, educate consumers and take 
enforcement actions against the perpetrators of financial 
exploitation.
    As some of the witnesses will discuss today, the CFPB is 
working to ensure consumer protections are in place for prepaid 
debit user cards and advising companies wanting to enter the 
FinTech arena.
    This is important work. Yet, today on the House floor the 
Republican majority is trying to gut the CFPB with the CHOICE 
Act, or what many of us are calling the Wrong Choice Act.
    The timing of this hearing is interesting. While some may 
think FinTech is just another disruptive technology that may or 
may not help people, members should be mindful of the bigger 
picture.
    Taking the teeth out of the CFPB is not the answer. The 
CFPB was created to protect consumers from fraud and financial 
products and it has proven itself truly able to help people.
    We should be working together to ensure the CFPB continues 
its robust mission and I hope all the witnesses and those 
interested in today's financial technology hearing join me in 
supporting the CFPB.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    This hearing is an update to last Congress' hearings on 
mobile payments and digital currencies. Technological advances 
are making financial transactions more convenient and 
efficient. With nine-in-ten Americans regularly connected to 
the internet and over 75 percent of us having smartphones, 
online access to banking has never been better.
    New financial products may help people pay and receive 
goods faster, and consumers may have better and more secure 
access to their funds. These products also may help people have 
greater control over their financial lives by giving them more 
and better financial information.
    These potential benefits are important, but these new 
financial products should have consumer protections attached to 
them, just like protections attached to older more traditional 
financial products. . Consumer protections are essential, and I 
look forward to hearing how we can help ensure there are 
appropriate safeguards, while, at the same time, encouraging 
this new marketplace to thrive.
    One area that is ripe for improvement in the financial 
sector is faster payments. In this day of technological 
advancements, some Americans still have to wait days for their 
checks to clear. Oftentimes, these consumers are then forced 
into turning to high-cost credit to access their own money.
    In 2015, the Federal Reserve created a Task Force to review 
the issue of faster payments, and I am hoping today for an 
update on the work of that Task Force. People should be able to 
get real-time access to their money. I realize that some actors 
in this space, such as check cashing companies, payday lenders, 
or wire transfer services, may lose out on fees if real-time 
access is achieved. However, with all of the technological 
advancements that have been made, delays are really not 
acceptable anymore, and they have adverse effects on merchants 
and others waiting to be paid.
    A number of Federal agencies play a critical role in the 
success of financial technology, including both the Federal 
Trade Commission and the Consumer Financial Protection Bureau 
(CFPB). These two agencies conduct research and analysis of 
consumer financial interests, educate consumers, and take 
enforcement actions against the perpetrators of financial 
exploitation.
    As some of the witnesses will discuss today, the CFPB is 
working to ensure consumer protections are in place for prepaid 
debit card users and advising companies wanting to enter the 
FinTech arena. This is important work. Yet, today on the House 
floor, the Republican Majority is trying to gut the CFPB with 
the CHOICE Act. Or, what many of us are calling the Wrong 
Choice Act.
    The timing of this hearing is interesting. While some may 
think FinTech is just another ``disruptive technology'' that 
may or may not help people, Members should be mindful of the 
bigger picture. Taking the teeth out of the CFPB is not the 
answer. The CFPB was created to protect consumers from fraud in 
financial products, and it has proven itself truly able to help 
people. We should be working together to ensure the CFPB 
continues its robust mission.
    I hope all of the witnesses and those interested in today's 
financial technology hearing join me in supporting the CFPB. 
Thank you.

    Mr. Pallone. I would like to yield the remaining 2 minutes 
to the gentleman from California, Mr. Cardenas.
    Mr. Cardenas. Thank you very much, Chairman Latta, and 
thank you very much, Congressman Pallone, for having this 
hearing. Good morning, and thank you all so much for being 
here.
    As some of you might know, my colleague, Congressman 
Kinzinger, and I led a resolution that passed last Congress 
highlighting some of the goals and responsibilities of the 
financial technology industry and how the Government can 
support innovation in this space.
    It was the first legislation related to financial 
technology, or FinTech, that has passed either chamber. I am 
not on the Financial Services Committee, and I don't come from 
a strictly financial services background.
    But let me tell you what brings me to be an advocate for 
smart FinTech innovation. I represent Los Angeles, which has 
five of the top 100 most unbanked Census tracks in the country.
    That means that nearly three out of 10 Los Angeles County 
residents--and L.A. County is 10 million people--are 
underbanked and may rely on short-term lending to pay their 
bills and stay afloat.
    FinTech innovation has the potential to help fix this. The 
reason I came to Congress is effect change that directly helps 
our communities, and working on FinTech at the Federal level is 
a great example of very real potential for change at the local 
level.
    FinTech could potentially give small businesses and 
consumers an alternative way to bank that doesn't force them to 
rely on high-interest short-term loans or other risky money 
management strategies.
    FinTech also has the potential to create hundreds of 
thousands of U.S. jobs. United States is the world leader in 
software development and technology, and it is in our best 
interests to develop a national policy on FinTech.
    This national policy must drive innovation, boost economic 
growth and ensure the protection of every American's personal 
information.
    Above all, we must make sure this policy helps the people 
that need it the most, like the people in my district.
    Thank you, and I look forward to hearing your testimony and 
answers to our questions today, and I yield back.
    Mr. Latta. Thank you very much. The gentleman yields back, 
and that concludes today's opening Member statements.
    The Chair would like to remind all Members that, pursuant 
to committee rules, all Members' opening statements will be 
made part of the record.
    And, again, I want to thank our witnesses today for being 
with us today to talk about this very important topic and 
today's witnesses will each have 5 minutes for their opening 
statements.
    Our witnesses today are Jeanne Hogarth, who's the vice 
president at the Center for Financial Services Innovation; 
Javier Saade, managing director at Fenway Summer Ventures; Ms. 
Christina Tetreault, the staff director at Consumers Union; and 
Peter Van Valkenburgh, research director at Coin Center.
    Again, we appreciate you all for being with us today and 
look forward to your testimony, and Ms. Hogarth, we will start 
with you for your opening statement.
    Thank you very much. If you want to just press that button, 
please, and pull the mic kind of close to you there.
    Thank you.

  STATEMENTS OF JEANNE M. HOGARTH, VICE PRESIDENT, CENTER FOR 
FINANCIAL SERVICES INNOVATION; JAVIER SAADE, MANAGING DIRECTOR, 
 FENWAY SUMMER VENTURES; CHRISTINA TETREAULT, STAFF ATTORNEY, 
 CONSUMERS UNION; PETER VAN VALKENBURGH, DIRECTOR OF RESEARCH, 
                          COIN CENTER

                 STATEMENT OF JEANNE M. HOGARTH

    Ms. Hogarth. Thank you. Chairman Latta, Ranking Member 
Schakowsky and committee members, thank you for inviting us 
here today to share some insights on the potential for 
financial technology to improve Americans' financial health.
    The Center for Financial Services Innovation is a national 
authority on consumer financial health and we lead a network of 
financial services innovators committed to building higher 
quality products and services.
    We believe that finance can be a force for good in people's 
lives and that meeting consumers' needs responsibly is good for 
both the consumer and the provider.
    Nearly three out of five American households struggle with 
their financial health. These households are banked but they 
are not well served.
    What people want and need is more automation of good 
choices combined with control and transparency. Unfortunately, 
most tools today don't provide this control and transparency, 
and FinTech, with better data, better analytics and better 
advice can ultimately provide that. CFSI is committed to 
working industry wide with a range of both incumbents and 
start-ups to encourage and seed innovation.
    In 2014, CFSI partnered with JPMorgan Chase to launch our 
Financial Solutions Lab, which supports the development of 
technology-based products that improve the financial health of 
Americans.
    The lab identifies challenges facing consumers and hosts an 
annual competition. As an accelerator program, we provide 
participants with capital and technical assistance from CFSI, 
JPMorgan Chase and a diverse community of industry partners and 
experts.
    We work with the lab companies to help them monitor the 
financial health of their customers as well as that of their 
own bottom lines.
    The first challenge for the lab was to solve for income 
volatility. Our second challenge was to help families weather 
financial shocks.
    Next week we'll be announcing our third cohort of financial 
tech companies who are trying to improve the financial health 
of consumers with particular emphasis on products on aging 
Americans, individuals with disabilities, people of color and 
women.
    Let me share three examples from our first FinLab cohort. 
Digit helps consumers automate savings by predicting their cash 
flow and identifying savings opportunities.
    Since launching in 2015, Digit has helped users save over 
$500 million. The average Digit user saves between $80 and $170 
a month, and while it's difficult to know if Digit users have 
enough liquid savings to cover an emergency, the use of 
automatic transfers is on the right path toward building a 
savings reserve to cope with an unexpected expense.
    SupportPay believes that technology should be used to make 
family life easier. Through an automated child support payment 
platform, SupportPay is helping parents amicably settle child 
support and alimony directly with each other.
    Today, more than 41,000 people, whether separated, divorced 
or grandparent custodians are using SupportPay and, as a 
result, are 90 percent more likely to exchange child support.
    SupportPay's data show that late payment rates have dropped 
from 33 to 25 percent. Even helps consumers stabilize volatile 
income by guaranteeing a consistent amount of pay each pay 
period.
    The team recently launched the 3.0 version of the app which 
pairs cash flow smoothing with an ongoing financial plan, 
improving consumer engagement and positive financial change.
    Even its focus on rolling out its product to thousands of 
employees of a large employer, which will be announced in the 
coming months.
    Beyond standalone products, it's important for FinTech 
providers to partner with banks, credit unions and other 
financial providers to offer products to a broader set of 
consumers.
    We believe that responsible partnerships provide wins for 
the credit unions and the banks, the FinTech providers and the 
consumers, especially for consumers of smaller and rural banks 
who can expand the array of products they offer.
    Consumer protection is still very much needed but policy 
makers need to identify the right tools to reshape the 
regulation of financial services to fit innovations in the 21st 
century. It's not a question of whether. It's a question of 
how.
    Importantly, we believe that FinTech can help consumers but 
it alone is not sufficient enough to ensure financial health 
for all Americans.
    It takes better job structures, living wages, benefits 
including sick leave and retirement plans and much more.
    Again, we appreciate this opportunity to share these 
insights with the committee and I'm happy to answer any 
questions.
    [The prepared statement of Ms. Hogarth follows:]
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    Mr. Latta. Thank you very much.
    Mr. Saade, you are recognized for 5 minutes.

                   STATEMENT OF JAVIER SAADE

    Mr. Saade. Thank you. Good morning.
    Chairman Latta, Ranking Member Schakowsky and distinguished 
members of the committee, thank you very much for the 
opportunity to participate here today.
    My name is Javier Saade and I'm a managing director at 
Fenway Summer Ventures. Fenway Summer is a venture capital firm 
that backs young companies innovating at the intersection of 
finance and technology.
    We capitalize fast-growing ventures and serve as a value-
added partner to the entrepreneurs that lead them. Since 2013, 
we have backed over 30 companies and have co-founded three 
ourselves: a credit card company, a tech-enabled mortgage 
lender, and a private student lender.
    I am honored to be here today and lend a voice to this 
important dialogue. Changing landscape in financial services. 
It's no secret, as all of you have said, that over the last few 
years the financial services industry has undergone a 
significant amount of disruption.
    Many factors have contributed to this but the most 
important, in our view, are the global financial crisis and the 
regulatory response engendered; rapid technological advances; 
secular shifts in consumer behavior and evolving capital 
markets' dynamics.
    Every sector of the financial services industry had been 
affected by these changes. FinTech has the potential to 
transfer the way that financial services are delivered and 
designed, widen credit and capital access funnels and reduce 
friction in the process of payments.
    In the past few years we have seen a proliferation of 
digitally enabled financial products. Just as smart phones 
revolutionized the way in which we interact socially, FinTech 
is revolutionizing how we interact financially.
    In our perpetually connected world, consumers, businesses 
and financial institutions are finding ways to engage in 
financial transactions that are more convenient, cost 
effective, timely, and secure.
    In addressing the traditionally excluded and underserved 
sectors of the population, FinTech companies are well 
positioned to drive innovation. It is estimated that around the 
world more than 2 billion adults are underserved and unbanked.
    In assessing the inclusiveness of the U.S. banking system, 
the FDIC 2015 survey of unbanked and underbanked households 
found that 30 million households either have no access to 
financial products or obtain products outside of the banking 
system.
    By reducing loan processing and underwriting costs, all 
nine origination platforms can enable financial services 
providers to more cost effectively offer small balance loans to 
household and small businesses that have been previously 
feasible. This in turn facilitates credit flow to individuals 
and firms that otherwise would not have access to credit. New 
technologies are also opening up efficient ways to manage money 
and control spending.
    We have seen mobile technology and innovations in 
distribution that enable financial service firms to reach 
communities that were previously unserved because building a 
traditional brick and mortar outlet was not economical.
    While financial innovation holds significant promise, it is 
crucial that all stakeholders understand and mitigate 
associated risks.
    There is a tension between aligning pace of development and 
new products and services being brought to market and the duty 
to ensure that these risks are addressed.
    This is precisely why we at Fenway Summer are focused on 
finding entrepreneurs who display what our firm's founder 
refers to as paradoxical conservatism.
    We look for entrepreneurs who have grand ambitions to 
effect positive change in the financial services industry but 
who understand that the fail fast and often approach typical of 
tech-driven start-ups in other sectors may not be well suited 
to the financial services industry.
    Two examples of our companies: one, EarnUp. It's a company 
that offers automated repayment of consumer loans, and FS Card, 
whose sole product is a credit card targeted towards customers 
seeking to establish, strengthen or rebuild our credit. EarnUp 
helps consumers save money and reduce debt by intelligently 
allocating income towards loan repayments.
    Budget in outstanding loans. EarnUp's technology integrates 
with thousands of services of home loans, student loans and 
auto loans and other asset classes in order to route consumer 
payments automatically.
    FS Card provides access to mainstream and reasonably priced 
credit to consumers in the 550 to 600 credit score range 
through their product called the Build Card, which is an 
unsecured credit card with a typical line of $500. In the 
absence of a product like this, consumers would likely need to 
resort to much more expensive alternatives like payday loans.
    Thanks for listening and, again, I appreciate the 
opportunity to be here with you and share my thoughts on this 
topic and I'm happy to answer any questions you may have.
    [The prepared statement of Mr. Saade follows:]
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    Mr. Latta. Well, thank you for your testimony.
    Ms. Tetreault, you are recognized for 5 minutes. Thank you 
very much.

                STATEMENT OF CHRISTINA TETREAULT

    Ms. Tetreault. Chairman Latta, Ranking Member Schakowsky, 
committee members, thank you for the opportunity to testify 
today.
    Consumers Union is the policy and mobilization arm of the 
independent nonprofit organization Consumer Reports. We 
research and report on financial services issues and engage in 
advocacy to encourage fair finance.
    We appreciate your leadership in investigating FinTech as 
we believe that it holds promise to increase inclusion and 
choice without sacrificing safety and security.
    FinTech holds this promise to increase financial inclusion 
by solving some of the problems that consumers report have kept 
them from using traditional financial services.
    Innovative products may provide consumers greater control 
over their financial lives and be offered at a lower cost and 
be more convenient than traditional or alternative financial 
services, leading to greater integration of the unbanked, 
underbanked and unhappily banked.
    We encourage service providers to bake in consumer 
protections as technology often moves at a faster pace than 
regulation. We also believe that there's role for lawmakers to 
ensure that appropriate safeguards are enacted while still 
being flexible enough to allow for new products to thrive in 
the marketplace when they provide meaningful value to 
consumers.
    Contrary to complaints by industry that regulation kills 
innovation, appropriately tailored regulation ultimately 
benefits businesses.
    While financial services regulation is essential for 
protecting consumers from harm, regulation and supervision of 
consumer financial services benefits industry by promoting 
consumer confidence and thereby driving adoption.
    Strong and consistent regulation also ensures that 
businesses that take consumer protections and regulatory 
compliance seriously are not at a competitive disadvantage to 
those that do not.
    Lawmakers and regulators should not hesitate to hold these 
new financial services businesses to the highest standards.
    Some of the most exciting developments in financial 
technology are occurring in payments. Cashless payments, faster 
payments and virtual currencies and the technology behind them 
may pose additional risks to consumers unless there are clear 
rules of the road.
    Cashless payments are improved by the Consumer Financial 
Protection Bureau's final prepaid rule. Our organization 
documented the unfair discrepancy between the protections 
afforded bank debit card users and prepaid card users for many 
years and we are pleased that the final rule no longer 
relegates prepaid cards to second tier bank account status.
    In addition to prepaid cards, the final rule extends 
protections to mobile wallets that store consumer funds. While 
this is a positive development, concerns around mobile payments 
remain.
    For example, consumers making peer-to-peer payments may 
find the complex liability chains make it hard to know who to 
contact if something goes wrong.
    We've also found that some providers do not offer a 
telephone point of contact to resolve issues. We urge 
stakeholders to address these concerns.
    Faster payments are another area where financial technology 
promises great improvement. A number of providers have 
announced plans to bring faster, potentially real-time payments 
to the United States.
    Speed may help bring underserved consumers back into formal 
relationships with financial institutions by reducing or 
eliminating the unpredictable aspects of traditional banking 
that drive consumers away such as fees, surprise fees and 
overdrafts.
    There are potentially unresolved questions about the 
applicable consumer protections and the faster payments 
environment such as when funds received must be made available 
to consumers and we urge stakeholders to work together to 
resolve outstanding issues so that the benefits of faster 
payments may be realized.
    Virtual currencies and the technology behind them hold 
tremendous potential but also may pose consumer risks. Many 
States are grappling with the question of whether these 
businesses should be licensed as money transmitters.
    The issue is complicated as this technology has uses beyond 
financial services. For example, ledgers transactions are 
recorded on may one day be used to protect intellectual or real 
property rights.
    Regulating those businesses as financial services is 
inappropriate. Many proponents of virtual currencies have 
potential to increase financial inclusion. It is precisely 
because disadvantaged consumers may be the first to experience 
harm that strong protections must be in place.
    At present the most pressing consumer protection concern 
around virtual currency is not technology specific. It exists 
because there are businesses built on virtual currency 
protocols that act as financial intermediaries.
    Whenever businesses come between consumers and their value, 
they must be held accountable. We urge a thoughtful approach to 
these technologies that ensures consumer value is protected.
    We believe that new financial products and services should 
be subject to appropriate public review and oversight by 
Federal and State financial regulators to ensure that financial 
services are safe and transparent and we urge providers to do 
their part by baking in consumer protections at the outset.
    Thank you very much for the opportunity to testify here 
today, and I'm available to take questions.
    [The prepared statement of Ms. Tetreault follows:]
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    Mr. Latta. Thank you very much for your testimony today.
    And Mr. Van Valkenburgh, you are recognized for 5 minutes. 
Thank you.

               STATEMENT OF PETER VAN VALKENBURGH

    Mr. Van Valkenburgh. Thank you, Mr. Chairman, members of 
the committee. I'm Peter Van Valkenburgh, the director of 
research at Coin Center, an independent nonprofit focused on 
the public policy questions raised by digital currencies and 
open block chain networks.
    I'm going to explain open block chain networks and then 
suggest why we need a unified Federal approach to regulating 
some businesses in this space while also offering a safe harbor 
to other businesses.
    Open block chain networks allow connected computers to 
reach a trustworthy agreement over shared data. The connected 
computers can be owned by anyone in the world.
    The shared data could be a ledger of digital currency 
ownership or any other data for which widespread agreement and 
auditability are essential.
    Notable open block chain networks include the original 
Bitcoin network for electronic cash as well as follow-on 
innovations such as Ethereum for smart contracts and Zcash for 
privacy.
    Open block chain networks are permission lists. There's no 
patent or copyright to license, no university or corporation 
from which to seek a job, no exclusive membership fee to pay.
    Anyone with a computer or a smart phone and an internet 
connection can use these technologies and even can help build 
them. Just as the PC democratized computing and the web 
democratized news and entertainment, open block chain networks 
are democratizing financial services.
    This innovation is inevitable. What remains undetermined is 
whether America will remain a home for permissionless 
innovation, as a venture capitalist might ask, and whether 
there will be responsible innovation, as a regulator might ask.
    Those aspirations are not irreconcilable, but they are also 
not guaranteed. America pioneered home computing and the 
internet in part because of our deep cultural and 
constitutional reverence for free speech but also because of 
two laws passed by Congress in the last 1990s: the 
Communications Decency Act and the Digital Millennium Copyright 
Act.
    Both laws created safe harbors for infrastructure-building 
businesses. They protected companies that were building the new 
information superhighways from third party liability stemming 
from the actions of users on those highways. These safe harbors 
made the U.S. a friendly home for the leaders of the internet 
revolution. But today we are following, not leading.
    A young innovator dreaming of building the future of 
financial infrastructure would be best advised to leave the 
U.S. not because she can do it on the cheap in a foreign 
jurisdiction that will look the other way but simply because 
instead determining what the U.S. regulatory landscape demands 
of her is a Herculean undertaking.
    Indeed, between 53 States and territories and several 
independent Federal regulators, it's a task that would be much 
simpler if she was in the United Kingdom and could ask one 
regulator, the Financial Conduct Authority, for an opinion.
    In order to reestablish the U.S. as a leader we need to 
rationalize the chaos of financial services regulation starting 
with State-by-State money transmission licensing. Custodial 
businesses should be regulated but they should not need to 
repeat a licensing process 53 times over.
    These businesses are by virtue of the internet interstate 
in their scope of operations and they should have similarly 
scoped regulators to avoid costly compliance redundancies and 
guarantee uniform consumer protection.
    Congress should encourage the Office of the Comptroller of 
the Currency to offer Federal FinTech charters to custodial 
digital currency firms and Congress should also consider the 
creation of a new Federal money transmission license as an 
alternative to State-by-State licensing.
    We also need a safe harbor. In several States the 
definition of money transmission is broad and can be 
interpreted to require that noncustodial developers of the 
technology be licensed.
    It is not reasonable to mandate licensure from a 
technologist who helps build the networks but is not holding 
consumer valuables. That's like trying to stop speeding by 
requiring costly licensing for highway construction personnel. 
It doesn't make sense and it'll only mean that fewer highways 
get built.
    But amending over broad laws in every State is not a 
scalable approach. The commerce clause empowers Congress to fix 
this problem. Much as it did in the 1990s for internet 
infrastructure, Congress should craft a Federal block chain 
safe harbor for noncustodial developers.
    Open block chain networks are the pipes for our future 
economy. We want this infrastructure built here without 
unnecessary impediment and with reasonable protections for 
consumers.
    Innovation can be both permissionless and responsible but 
it will only happen in the U.S. if we take a unified national 
approach to regulating custodians and create a safe harbor for 
noncustodial developers.
    Thank you.
    [The prepared Statement of Mr. Van Valkenburgh follows:]
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    Mr. Latta. Thank you very much for your testimony, and that 
concludes our testimony from our witnesses today. I will begin 
the questioning of our witnesses and I will recognize myself 
for 5 minutes.
    Ms. Hogarth, in your testimony you mentioned some of the 
less mature aspects of FinTech innovation like insurance 
products and block chain that have the potential to drastically 
improve consumers' lives.
    What are some of the emerging technologies that are most 
exciting to you?
    Ms. Hogarth. Thank you, Mr. Chairman.
    We see a lot of opportunity for disruption in the insurance 
arena and in insurance it's more than just what you think of 
as, you know, your house insurance, car insurance, health 
insurance.
    As we think about older Americans--and I will count myself 
in that--getting ready to approach retirement, thinking about 
dissaving and helping Americans begin to decapitalize and 
unsave the 401K and IRA money that they have in their 
portfolios, finding new ways to create pensions that are going 
to be lasting outside of perhaps what is traditionally an 
annuity system.
    So the insurance market is certainly ripe for disruption 
for the consumer products.
    Mr. Latta. Thank you.
    Mr. Van Valkenburgh, your group has focused on the block 
chain technologies or the distributed ledger technologies. Will 
you give the subcommittee some of the insights into what you 
think are on the horizon for the industry in the future?
    Mr. Van Valkenburgh. Thank you, Mr. Chairman.
    These are young technologies and as I said in my opening 
statement they are fundamental infrastructure. They are pipes.
    So many of the consumer-facing apps are still in their 
infancy and this is why I think we still see fairly little 
actual consumer adoption from normal Americans.
    However, what excites us most about the industry is that 
this infrastructure is open for others to build applications on 
top of.
    So, for example, a company could build an app that 
facilitates international remittances. The company designs the 
user interface so that it's friendly, it's useful, it's 
compliant with KYC requirements and has consumer protections 
baked in, as my colleague suggested.
    But rather than moving the money between the users via 
correspondent banking systems, the app uses digital currency to 
move value between the sender and the recipient.
    Now, the value moves faster in that system--an hour instead 
of three or more days--and the fees are potentially lower 
because there are not multiple correspondent banks in between.
    There is two things that are important to point out in that 
hypothetical. One is that the technology made the application 
more friendly for the user--lower fees, a smart phone 
application that makes sense to them--but second, that the 
technology, the open block chain network, made it easier for 
the business to get started.
    It lowered the barriers to entry for competition. Because 
previously they would have had to establish a banking 
relationship or multiple banking relationships with 
correspondent banks and several branch locations.
    But now they can simply build their consumer-facing app on 
top of existing open block chain infrastructure and smart 
phones.
    Mr. Latta. Thank you very much.
    Mr. Saade, in your testimony you focused, of course, on the 
FinTech innovation and in the last year what patterns or trends 
have you seen for new entrants that are out there?
    Mr. Saade. Thanks for the question.
    The exciting part about what's happening in financial 
services is that it's a confluence of events that have led to 
all of this happening almost at the same time.
    If you think about what the iPhone or the smart phone did 
to basically everything, there were a lot of capabilities to do 
that because there was no significant institutions that were 
divergent from a particular technology.
    In the case of financial services I agree with my colleague 
here that there's a lot of things we are starting to see in 
insurance technology.
    We are starting to see a lot of things in what's termed 
legal tech or reg tech, which is at the end of the day 
regulations are ones and zeroes just like any other bit of 
information, and there's ways to comply and better ensure that 
consumers and small businesses are safe.
    So there's a continuing amount of innovation across the 
spectrum.
    Mr. Latta. Thank you very much.
    And my time has expired and I now recognize for 5 minutes 
the gentlelady from Illinois, the ranking member of the 
subcommittee.
    Ms. Schakowsky. Thank you so much.
    Mr. Chairman, when I first saw the title of today's hearing 
I was really glad to see that we agree that there's room to 
improve the financial options currently available to consumers, 
and it's our job then to ensure that the American people have 
access to financial products that are fairly priced, 
innovative, and not abusive.
    But I'm sorry that I'm really distracted--or not, maybe not 
distracted--I want to bring into this room the fact that I 
think that we cannot do those things without an empowered 
Consumer Financial Protection Bureau, and today on the floor we 
are going to do a lot to undermine Dodd-Frank.
    I wanted to ask--let me say your name right so I can look 
at it here--Mr. Van Valkenburgh, you know, you seem to suggest 
a kind of new Federal regulatory scheme.
    You talked about the OCC getting involved. But it seems to 
me that the CFPB can play a role, too, in entering this arena 
and future arenas and having that institution in place is 
really important. What do you think?
    Mr. Van Valkenburgh. One role that the CFPB has already 
played is enforcing unfair and deceptive and potentially 
abusive acts and practices.
    This is a logical way, potentially, to regulate some of the 
entities in this space because it's an ex-postregulatory scheme 
rather than ex-anti.
    Our chief bugaboo, if you will, is the fact that companies 
need to get licensed in several States before operating, not 
necessarily that there aren't adequate watchdogs who can police 
their behavior once they're running.
    As far as creating a Federal hub for regulation, we are 
agnostic as to which agency takes on that authority. What we 
primarily want to see is coordination between the agencies 
because, as I remarked, things are much simpler in more unified 
governments like in the United Kingdom, where there's one point 
agency, the Financial Conduct Authority, that does all 
regulation.
    Ms. Schakowsky. Having all different rules across many 
different States, I get it.
    I wanted to ask Ms. Tet-tree-ault--how do I say it?
    Ms. Tetreault. Tetreault.
    Ms. Schakowsky. Tetreault. OK. Got it.
    I wanted to ask about the CFPB. I know Consumers Union has 
been an advocate and helped in our deliberations over that by 
altering the CFPB structure and funding.
    How does the Republican bill on the floor today undermine 
the agency's ability to do its job of protecting consumers in 
the space that we are talking about?
    Ms. Tetreault. So the CFPB has done amazing work for 
consumers, returning $12 billion to nearly 29 million Americans 
who have been wronged.
    It also provides an essential channel for getting consumer 
complaints resolved. They've helped hundreds of thousands of 
consumers who have complained to the CFPB get resolution with 
the companies who in many instances have ignored their 
complaints leading up to that time.
    There's an amazing 97 percent resolution rate on the 
complaints that come through the CFPB.
    So it would be a tremendous loss to consumers to have its 
capacities diminished and particularly as my colleague here to 
the left said about its UDAAP authority.
    So the Financial CHOICE Act would significantly reduce if 
not entirely eliminate in some instances the ability of the 
bureau to go after scammers and ripoff artists and that would 
be a huge loss for consumers.
    Ms. Schakowsky. Right, and I wanted to follow up on that. 
Bad financial actors that take a lot of money preying on 
seniors, on military members, on low-income population, why 
would they be disproportionately harmed then by the undermining 
of the CFPB?
    Ms. Tetreault. The Consumer Financial Protection Bureau has 
speciality agencies within it. There are speciality units 
within it that focus on particular problem areas where 
consumers have suffered incredible harm and that includes 
service members as well as older Americans.
    So these communities would really be devastated if the 
protections and the oversight that the Consumer Financial 
Protection Bureau offers are reduced, eliminated or otherwise 
redirected.
    Ms. Schakowsky. The CFPB rule also applies to digital 
wallets such as PayPal, right. So under the rule what 
requirements would be in place to protect users of digital 
wallets?
    Ms. Tetreault. Sure. So it's really some pretty basic 
safeguards: ensuring transparency and right to recredit and 
redress if errors or fraud are detected. So it's really the 
same safeguards that apply when you swipe a plastic card for 
debit purchase at point of sale.
    Ms. Schakowsky. Let me just say that I see this 
subcommittee as a place where we should be protecting the CFPB 
because we are designated to do consumer protection.
    Thank you. I yield back.
    Mr. Latta. The gentlelady yields back, and the Chair now 
recognizes for 5 minutes--you're on--the gentleman from 
Kentucky.
    Mr. Guthrie. Thank you very much. I appreciate that very 
much.
    First, Ms. Hogarth, the Financial Solutions Lab has some 
very interesting stories based on the start-ups you highlighted 
in your testimony, and I have a couple questions.
    One--and I will ask them both--how are you working with 
those companies to create any easier path to commercialization, 
and how many of the companies that won funding through your 
application processes are offering products to customers?
    Ms. Hogarth. So thank you very much.
    We work both with industry incumbents as well as start-ups 
and we have a network that provides introductions so that there 
are opportunities not only for partnering where, you know, the 
entities stay as individual entities but they're partners--
third-party vendors to an incumbent--but we also provide access 
through additional venture capital and our network discussions 
to help them grow and build their business independently.
    And one of our companies in our first cohort, Prism, has 
been acquired by a company called PayNearMe. So there's a lot 
of different ways, you know, that you can think about 
partnering with a financial institution. You know, you can 
acquire it. You can partner with it. You can also just compete 
with it.
    But I think the reality is is that we really do want to see 
these ideas grow to scale and eventually the idea of 
partnerships is really, really important for the companies in 
our lab.
    Mr. Guthrie. Thanks.
    Mr. Saade, in your testimony you mentioned that not only 
does your firm invest in FinTech companies but you also have 
co-founded three companies. In your experience, what were the 
biggest hurdles launching your own start-ups and what was your 
experience working with regulators across the country?
    Mr. Saade. Starting a company is a leap of faith no matter 
what, regardless of having the ability to raise the capital, 
having an understanding of what the regulatory landscape is.
    Entrepreneurs overall, no matter in what industry in this 
country or around the world, really--it's a global ecosystem of 
entrepreneurs--need to be supported.
    So I think really the biggest hurdle to start the companies 
we started or for any entrepreneur to start companies is 
actually having an environment which supports that and there's 
no better place I can think of.
    There are pockets of innovation in which, for example, it 
was brought up that the FCA is a much easier place and 
situation to deal with.
    But the overall entrepreneurial ecosystem in the United 
States bar none is the best one--that there's a tug of war 
which policymakers always need to ensure that they're dealing 
with, and that is that if you're too easy on the capital 
formation side the consumers get hurt and if you pull too much 
on the other side you end up hampering innovation.
    So at the end of the day--that's a very long answer to say 
that taking a leap of faith is really what innovation and 
entrepreneurship is about with a backdrop that supports it.
    Mr. Guthrie. Thank you.
    And Mr. Van Valkenburgh, Coin Center testified before this 
committee last Congress when we took a look at digital currency 
and block chain technology.
    What can you tell us about how the landscape has changed 
for that technology in the last year, and we heard a lot about 
potential applications. Can you tell us about where you see the 
most promise in the short term?
    Mr. Van Valkenburgh. Thank you, Congressman.
    I think the biggest change has been the emergence of 
several new networks based off of the original Bitcoin open 
block chain technology.
    For example, I mentioned in my opening remarks Ethereum, 
which is a decentralized network for creating smart contracts.
    Smart contracts are a fancy word, basically, for more 
programmatic flows of funds through these networks. With 
Bitcoin, a transaction normally looks like I paid Mr. Chairman 
some Bitcoin.
    With a smart contract, we could give each of you a device, 
have that device provision you with a key of sorts, like a 
password, and quite literally have you vote on the flow of 
funds through the network.
    And unless somebody can penetrate each one of your devices 
and make you vote against your will, the movement of funds will 
have fidelity with your opinions when you make that vote.
    That is a fantastic innovation. It exists to some extent in 
Bitcoin under the name multi-sig transactions--multiple 
signatures from multiple people who are voting on the movement 
of funds.
    Ethereum makes programming those smart contracts even 
easier so you can imagine even more complicated decentralized 
applications being built by supremely bright people on top of 
those networks.
    Additionally, Bitcoin is a very transparent network. It's 
not very private because all of the transactions are fully 
auditable on the block chain.
    Another innovation that's recently emerged is a technology 
called Zcash built on scientific research that allows for more 
private but still fully verifiable block chains. That's also 
very exciting.
    Mr. Guthrie. Thank you. My time has expired. I yield back.
    Mr. Latta. Thank you. The gentleman's time has expired and 
the Chair now recognizes the gentlelady from New York for 5 
minutes.
    Ms. Clarke. Thank you, Chairman Latta, and to our ranking 
member, Jan Schakowsky, to our expert witnesses. Thank you for 
your testimony here this morning.
    As the FinTech industry has grown, a number of our new 
companies, not just banks, have begun offering financial 
products such as e-lending and electronic payments.
    The Consumer Financial Protection Bureau and the Office of 
the Comptroller of Currency have been active in trying to help 
these companies understand their regulatory responsibilities.
    In December of 2016, OCC proposed creating a special 
national bank charter for FinTech companies. State regulators 
and consumer groups including Consumers Union, however, have 
asked OCC to withdraw the proposal.
    Ms. Tetreault, the comments submitted to OCC consumer 
groups including yours expressed their concern that the 
proposed charter could preempt critical State consumer 
protections like caps on interest rates for loans.
    Can you expand on those concerns and if OCC does go forward 
with the new national charter, what are the baseline consumer 
protections that it needs to contain?
    Ms. Tetreault. Thank you.
    The OCC's FinTech charter or special purpose charter 
unfortunately would abrogate many of the State laws that are 
really there to protect consumers against predatory loans and 
so that is the primary concern that the advent of such a 
charter would create a race to the bottom as businesses south 
to find the lightest approach to oversight to them.
    And so we've really expressed strong concern about this 
proposal, really thinking that State regulators are in a much 
better position to supervise and examine these banks and also 
that the protections that States have put in place should be 
honored to protect their citizens.
    So it's really, you know, a concern about overriding these 
in many case very strong protections, although the protections 
vary greatly from State to State.
    So to your second question, if there were to be such a 
special purpose charter extended, it would be the same strong 
oversight that the States provide. It would include no 
preemption of these State protections.
    It would be extensive examination and then, of course, the 
safety and soundness of requirements that are so essential to 
ensuring consumer protection.
    Ms. Clarke. Drill down a little bit deeper on that and say 
how the OCC's proposed charter differs from existing bank 
charters and how they would be similar.
    Ms. Tetreault. So right now I would actually draw a greater 
contrast between the way that States supervise financial 
services, license financial services entities and why that's 
the preferable model.
    To say that you have some States like California and New 
York that really have extensive methods for examining the 
entities that they supervise.
    They can really go in there. They can see in a level of 
detail that perhaps might elude a Federal regulator. So we've 
seen instances in the lead-up to the housing crisis where 
federally regulated entities were made aware of problems, and 
action wasn't taken, and we know how that resulted in, you 
know, many millions of foreclosures and a financial crisis that 
nearly took down the entire economy.
    So there are some pretty grave concerns about having the 
Federal oversight that perhaps might not had the attention to 
detail, and that is I think the biggest contrast between what 
is done now and what might happen under this.
    Ms. Clarke. And do most FinTech companies currently offer 
their services independently or do they partner with banks or 
other traditional financial service providers?
    Ms. Tetreault. So it's really a mixed back in that regard. 
So you have guidance to help banks and financial service 
companies that are nonbanks partner together and there are 
pretty extensive rules of the road for ensuring consumer 
protection in that regard.
    You also may see start-ups who seek licensure within the 
States and you have some pretty successful examples and I will 
just cite one, which would be PayPal where they're able to do 
the work that they do and by pursuing these State licensees.
    So it can really be--you know, there also may be a start-up 
that happens within a State, and that's the first State that 
they seek out licensure, and so it's a mixed bag.
    Ms. Clarke. Mr. Chairman, I yield back.
    Mr. Latta. Thank you very much. The gentlelady yields back.
    And the Chair now recognizes the gentleman from West 
Virginia for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman.
    One way that consumers access FinTech is through their 
smart phone and for many individuals in rural areas it's not a 
very reliable service.
    In West Virginia, the mountainous terrain limits that 
ability for people to have access. So I'm curious as to how 
FinTech companies are addressing the needs of rural areas as 
compared to those in more urban settings.
    Is there something that you're focussing on that you would 
recommend we look towards for addressing rural areas as 
compared to the urban centers?
    Don't all speak at once.
    Ms. Hogarth. So I will take a stab at that.
    Mr. McKinley. Thank you.
    Ms. Hogarth. I mean, I said that, you know, FinTech is 
necessary but not sufficient and there are a set of 
infrastructure issues that clearly need to be addressed, not 
just in the mountainous regions but in any rural area.
    And we should also add even in urban areas, you know, wifi 
is not necessarily ubiquitous or cost-free. And so for many 
low-income households accessing data plans is a really tough 
pull on their budgets.
    So in addition to sort of thinking through some of the 
issues that you heard today this is really a whole cloth 
because you're exactly right.
    There needs to be some sort of infrastructure program in 
place to be able to provide access to reliable high-quality 
broadband services whether that is a wired line, a fiber optic 
line or a wifi.
    Mr. McKinley. Thank you.
    Because I think far too often in this country we focus on 
our urban centers and our rural communities across this country 
are shortchanged on access and other opportunities whether it's 
health care, growth, water, sewer.
    I could go on with it. So I'm hoping that through these 
services how helpful these can be with our smart phone. We are 
still limiting a certain number of people.
    Mr. Saade, in your testimony you mentioned how many 
Americans are underserved by existing products and services to 
help them with their finances. But there's also been a 
discussion about the attention between bringing new innovations 
to market quickly and making sure consumers are protected 
because this is their financial health.
    So how has your firm attempted to address this tension and 
make sure that the consumers are getting safe, secure and 
innovative products?
    Mr. Saade. So one comment on your previous question. I 
sense that the digital divide actually knows no--the issues 
you're facing in West Virginia are not dissimilar to what you 
see in the South Bronx.
    Even though it's heavily populated--heavily populated 
areas, the digital divide actually affects underserved 
communities in different ways.
    So there's some threads across what you're seeing in the 
mountains of West Virginia with what you see in the canyons 
across the East River.
    When we look at businesses to invest in, we don't believe 
that regulatory arbitrage is a business model and in fact a 
couple of the principals, myself included, actually served in 
the Federal Government in the executive branch as actual 
regulators.
    So we are very cognizant of the fact that innovation has to 
be done responsibly, and a lot of innovation that we see, 
there's almost like a natural self-selection of people that 
approach us or we approach because they're doing innovative 
things in a way that doesn't harm consumers.
    So I don't think it's a binary choice. I think you can 
accomplish all of it. It's just a tug of war. It depends on 
where in the spectrum you want to fall. But innovation can be 
done very responsibly.
    Mr. McKinley. Thank you. I yield back.
    Mr. Latta. Thank you. The gentleman yields back the balance 
of his time.
    The Chair now recognizes the gentleman from Texas for 5 
minutes.
    Mr. Green. Thank you, Mr. Chairman and Ranking Member, for 
having the hearing today and as well for our witnesses to take 
the time to testify.
    FinTech has the potential to help not only entrepreneurs 
and investors but those who need financial help in their daily 
lives the most. Often the people with the least time and with 
the most things to juggle on day to day basis are those who 
come from less financially literate backgrounds.
    The help that FinTech can provide to the working class is 
especially important. Apps with the potential to help people 
pay their bills, improve their credit, provide guidance on how 
to distribute limited resources across many needs represent a 
welcome development, for one, from which Congress must work to 
provide the necessary regulatory framework.
    However, the testimonies of the distinguished witnesses 
also highlight the importance of consumer protections. Despite 
the potential benefits as consumers' financial data becomes 
available to an increasing number of service providers, 
consumers become more vulnerable to the theft and abuse of that 
data. They must have somewhere to turn in case that happens.
    I look forward to discussing on how the balance to the 
risks and rewards that FinTech can offer with witnesses.
    Ms. Tetreault, in your testimony you underline the 
importance of consumer protections when it comes to FinTechs 
and you lay out consumer safety guidelines which several types 
of FinTech service providers should adhere.
    With the CHOICE Act on the floor this week, what impact if 
any do you see this having on the ability of the Consumer 
Finance Bureau to implement and enforce these guidelines?
    Ms. Tetreault. Sure. So I think if the Financial CHOICE Act 
passes it would be devastating for consumers for a variety of 
reasons, specifically related to consumer harms.
    It gets rid of the monitoring function of the bureau and 
the market monitoring allows the CFPB staff to get a good 
insight into what's happening within various segments within 
financial services and meet with those industry leaders and 
service providers and also to monitor consumer complaints and 
concerns long before they become system issues or widespread 
problems for consumers.
    So that would disappear. You'd have the loss of the public-
facing database, consumer conflate database that allows not 
only researchers but everyday people to go ahead and look and 
see where the issues are with particular service providers 
around particular products.
    It's searchable in many dimensions. There would be a loss, 
presumably, of the specialty offices within the bureau or at 
least those are made optional so you potentially lose Project 
Catalyst, which is an initiative from the bureau to take a look 
at innovation.
    With that you lose the convening that the bureau does for 
financial technology companies and providers. You lose the 
opportunity for a no-action letter which is----
    Mr. Green. I'm almost--I only get 5 minutes. We've heard 
today about FinTech's potential for offering financial service 
for the unbanked and underbanked populations, which tend to be 
lower income.
    But research shows that the majority of the people that are 
actually using FinTech products are wealthier customers. What 
needs to be done so that the unbanked and underbanked 
populations can also have full access to FinTech potential 
benefits and are there obstacles preventing these populations 
from using these traditional financial services because of the 
lack of access to these new financial products?
    Ms. Tetreault. So access to broadband is definitely an 
issue and one that's been discussed here because so many of 
these innovative products and services are reliant on a secure, 
sound, continuous internet connection. That, I would say, is a 
very strong hurdle.
    I think the other is one of the things that we've seen a 
lot is consumer concerns. So, you know, the stories that we 
hear back when we ask people, for example, why aren't you using 
mobile payments is they say, I'm worried about safety and 
security.
    And while the evidence may indicate that these services are 
quite safe, the consumer perception potentially was there 
because of these gaps that existed, for example, before the 
CFPB's final prepaid rule.
    So, you know, there is I think any number of things that 
stand in the way of consumers engaging with these services and 
concerns that can be addressed by appropriate safeguards.
    Mr. Green. I am almost out of my time. Last month, Energy 
and Commerce Democrats introduced the Lift America Act, a 21st 
century infrastructure package that includes $40 billion to 
expand access to broadband internet not only in rural areas but 
also in the urban areas like I represent.
    Thank you for your time, Mr. Chairman.
    Mr. Latta. Thank you. The gentleman yields back.
    And the Chair now recognizes the gentleman from Indiana for 
5 minutes.
    Mr. Bucshon. Thank you, Mr. Chairman.
    A question for anybody, really. I mean, technology is 
great. My older kids use Venmo. They don't have any cash, 
right. So we know that people are underbanked and unbanked now. 
What makes us optimistic that adding technology to that will 
substantially change that situation?
    Just a hypothetical because there are reasons why people 
don't have a bank or they're underbanked now, and it could be 
access to a local, you know, to a bank standing on the corner. 
But there are other, more complicated reasons why. And so when 
you add actually the--I'm just playing a little devil's 
advocate here--you add the technology on board, what makes us 
think that that will help? Be curious to--anyone.
    Ms. Tetreault. I will just--thank you--I will address that 
very briefly around faster payments. I will use faster payments 
as an example, as that's an area where the technology will need 
to move forward to bring us to real-time payment, and there are 
proposals out there.
    And how I can see that bringing in underserved consumers is 
that it allows for real-time information for better money 
management, and then there are potential aspects of the 
technology that would ensure that there wouldn't be an 
opportunity for things like surprise fees or overdrafts for the 
way that the payments actually work.
    So I see that. We know for a fact from consumers, due to 
extensive research, that it is surprise fees and overdrafts 
that often drive consumers out of the mainstream banking system 
and forces them to use, you know, more expensive products or 
rely on cash.
    So I see that particular area as a tremendous opportunity.
    Mr. Bucshon. OK. Yes.
    Ms. Hogarth. And I would add in addition to the faster 
payments piece that the ability of financial technology to give 
consumers a 360-degree picture of their finances is really, 
really important because a lot of times you're operating in 
one-off decisions when you don't really understand the 
interaction of the decision X with decision Y and financial 
technology and many of the apps now are really trying to help 
consumers get that fuller picture of their financial lives.
    Mr. Bucshon. OK.
    Mr. Saade. I was going to say that just one example that 
happens to be a relevant one here is that the biggest 
generation of Americans--76 million or something of them--
typically would rather not step foot in any one of the 100,000 
or so, give or take, bank branches in the United States.
    So even though there's sort of a dark side of technology 
kind of making you anonymous, as we have seen in other 
industries----
    Mr. Bucshon. Oh, yes.
    Mr. Saade [continuing]. In the media recently, that sort of 
faceless ability enables you to access things with a lot less 
friction and the lack of friction leads to lower cost. So I 
think the question is not what but how.
    It's a very good question you ask but the--and if you look 
at it from a business perspective, 2 billion people are not 
getting banked around the world. That is a huge business 
opportunity.
    So there's a lot of people thinking about this exact issue, 
not just venture capitalists or the people here but people 
across the spectrum.
    Mr. Bucshon. OK.
    Mr. Van Valkenburgh. The only thing I would add is that the 
user interface matters a great deal with technology. Google was 
actually the fifteenth search engine thereabouts.
    There were several that tried to make the web accessible to 
people and help them find the information they wanted but 
simply didn't make it intuitive. It just didn't make sense to 
people when they tried to use it. Rapidly prototyping and the 
ability of new people to come in with a fresh idea of how to 
get people excited about their financial futures is very 
important and to the extent that open block chain networks 
create infrastructure that they can build on top of minimizing 
the costs of trying something new I think will see much more 
rapid consumer adoption of these new tools because they'll 
suddenly make sense when they're finally built by the right 
people had the right vision.
    Mr. Bucshon. Yes. My concern is that, what do you think 
will happen to more traditional ways that people access the 
banking system?
    Because, as you know, already technology is such where--
say, for example, my parents, you know, who have gone to a bank 
for years and years. What happens when there's no longer a bank 
on the corner? So I think we need to think about that question 
also, and I'm all for technology.
    I think it's great. But to your point, we need to make sure 
that the services that are available are intuitive, are easily 
accessible not only to my sons who are in their 20s but to my 
in-laws and my parents who are in their 80s if we are going to 
backtrack a little bit on more traditional type service 
availability.
    Thank you. I yield back.
    Mr. Latta. Thank you. The gentleman yields back.
    And the gentleman from California is recognized for 5 
minutes.
    Mr. Cardenas. Thank you, Mr. Chairman.
    Once again, I appreciate the opportunity for us to have 
this hearing. This question goes out to any of the individuals 
who want to chime in and answer.
    Could you give some examples of how often is a bank account 
needed to participate in these technologies and count as a 
traditional bank account?
    Mr. Van Valkenburgh. Especially in the digital currency and 
open block chain space, despite the fact that the technology I 
described in some ways supplants the correspondent banking 
system, there will still be a need to onramp people into these 
new digital currency networks.
    So it will be very common for the company to have banking 
relationships that they process payments for and it will be 
necessary for the user to have a bank account that they can 
connect in order to exchange their dollars for digital 
currency.
    Unfortunately, many of the companies that are working in 
this very exciting space have had trouble getting and 
maintaining banking relationships because they're seen as a 
money-laundering risk.
    That is despite the fact that all of the companies 
operating in the U.S.'s exchanges are fully registered and 
compliant with anti-money laundering requirements from FinCEN.
    I think there is a bit of a cultural problem here where 
perhaps the examiners look at this as a fringe technology that 
should simply be ignored and banks take a derisking approach.
    I think that approach may be misguided because we want 
these companies in the regulatory system because if these 
technologies exist outside of the regulatory system we'll 
simply have less information about what people are doing with 
them and will not allow them to flourish as hubs for innovation 
in these services.
    Mr. Cardenas. OK. Well, Mr. Van Valkenburgh, how do you 
open block chain networks? How does open block chain networks 
encourage financial inclusion and diversity in the financial 
marketplace?
    Mr. Van Valkenburgh. So the primary mechanism, I think, is 
allowing for the rapid prototyping of new tools that can be 
intuitive for users and meet their goals.
    So transactions can be faster when their back end is 
running through an open block chain network. It can be cheaper 
for the customer and it can also be cheaper for the business to 
try new approaches.
    So I think in that competition you find more likely there 
will be an emergence of apps and services that speak to 
underserved communities, make them want to use those 
technologies and make it easier for them to use those 
technologies safely.
    Mr. Cardenas. OK. Thank you.
    Ms. Tetreault, are there occurrences of deceptive practices 
in the financial industry that consumers should be aware of, 
and if there are, what role can Congress play in helping to 
alleviate that issue?
    Ms. Tetreault. There are many abusive practices. 
Fortunately, we've seen a tremendous enforcement of consumer 
financial protection laws by the Consumer Financial Protection 
Bureau. So that's where you have these 29 million Americans 
getting back $12 billion in relief.
    In terms of existing problems, having a strong cop on the 
beat is really essential to ensuring the consumers are 
protected, and we are very eager to see the strength and 
integrity of the Consumer Financial Protection Bureau ensured 
by keeping a strong leadership structure, no attacks on funding 
and maintaining its singular focus on consumer financial 
protection as opposed to dissipating and across a number of 
Federal regulators.
    Mr. Cardenas. So having a cop on the beat is a good thing?
    Ms. Tetreault. Absolutely, and I think, you know, you can 
see every day it seems that there's another example of a 
financial institution or financial service provider behaving 
badly and to see them held to account not only holds that 
business to account but it sets an example so that other 
services providers know that they need to mind their p's and 
q's.
    So it's incredibly important to consumers to have this cop 
on the beat, or as we like to refer to it, consumer watchdog so 
that folks, you know, are protected and make sure that there 
are not only protections in place because of the rulemaking 
authority but also people watching out to ensure that there are 
safe financial service products available.
    Mr. Cardenas. I mentioned earlier in my opening statement 
about the opportunity or idea that perhaps this opportunity 
could give unbanked individuals and households an opportunity 
to get involved in access to capital and financial stability.
    What does this technology bring to bear when it comes to 
underwriting and giving someone an opportunity to get access to 
capital versus the old brick and mortar, you know, old-
fashioned underwriting methods?
    Ms. Tetreault. So the one thing I would say that we do see 
a lot of attempts from service providers to quantify the 
creditworthiness of consumers. I would just raise two quick 
concerns.
    In many instances there's a lack of transparency and then 
there's the concerns around the way that data is collected and 
used and would urge service providers to be considerably more 
transparent in the way that they quantify consumers.
    Mr. Cardenas. Thank you. Yield back.
    Mr. Latta. Thank you. The gentleman's time has expired, and 
the Chair now recognizes for 5 minutes the gentleman from 
Illinois.
    Mr. Kinzinger. Thank you, Mr. Chairman. Thank you all for 
being here today. This is a very important hearing. This 
committee having jurisdiction over consumer affairs, I'm very 
pleased that we are continuing to shed light on the importance 
of financial technology and the benefits it can provide.
    FinTech is improving the speed, convenience, efficiency and 
accessibility of financial information for consumers. At last 
Congress I introduced a resolution with Congressman Cardenas 
highlighting the potential positive impact technology can have 
on a consumer's financial health and expressing the sense of 
Congress that there should be a single national strategy to 
ensure the development of FinTech.
    In many cases we see out here technology always leads 
Congress and Government, and we basically kind of wake up and 
see what's happening and then have to figure out a strategy to 
deal with it.
    So some of you have already answered to an extent this 
question but I just want to ask it of all of you and I will 
start with Mr. Van Valkenburgh because he has the coolest last 
name on the committee or on the panel. No offense to the rest 
of you.
    But what are the issues and trends that we in Congress need 
to watch for to ensure that consumers benefit from innovation 
in a responsible and a secure way?
    Because it sounds like developing the regulatory framework 
can obviously be a huge challenge. But this access to the 
financial account is very serious and should be treated as 
such. So I'd appreciate all your thoughts. I will start with 
you, sir.
    Mr. Van Valkenburgh. So I think the key distinction to be 
made is between technologists who are building these 
technologies and holding other people's value, playing that 
custodial role, and technologists who are simply building the 
future infrastructure, really, the pipes for the future 
economy.
    Making that distinction is key because I think you're 
absolutely right that we need a unified approach to regulating 
those custodians to make sure consumers are protected and we 
very much appreciate your and Congressman Cardenas' resolution 
emphasizing that point.
    But it's also very important that people who are building 
the fundamental infrastructure are not swept up in a burdensome 
regulatory regime that isn't aimed at the risks they create 
because they don't take custody, because they don't actually 
hold other people's valuables.
    Mr. Kinzinger. That's interesting. OK.
    Ms. Tetreault. I would say first the importance of strong 
rules of the road as exhibited with the Consumer Financial 
Protection Bureau's final prepaid rules.
    So having that extend to digital wallets that hold funds I 
think is a great example of how regulations can be in place at 
the Federal level.
    And then to the question about any sort of streamlined 
oversight is so long as the State consumer financial protection 
rules are not preempted, you know, there's opportunity there.
    Mr. Saade. Yes, we've been, obviously, very focused on 
lending and kind of the debt side of the balance sheet. But 
just to highlight that, there's a whole other side of the 
balance sheet which is equity and the SEC, for example--I'm 
just going to answer it this way--tried a lot of really 
interesting things to allow for common citizens to participate 
in let's call them high-value potential investments and for 
otherwise companies raising capital or projects raising capital 
or people raising capital--not loans but actual capital--is 
Title 3 of the Jobs Act, and they worked pretty diligently to 
get it done, but what it highlighted was that, as they were 
going through that, all of the States' regulatory entities for 
securities were doing their own fixes, and they were doing them 
only with the hope that the SEC would then work with the 
preemption.
    So I think that the jobs all of you have is very difficult. 
But if you put things into the perspective of what benefits 
consumers respond to, you end up in a place that actually is 
solutions that could work.
    Mr. Kinzinger. Thank you.
    Ms. Hogarth, I have another question for you, and since 
time is limited I will just ask that.
    You discussed seeing competition in the FinTech space 
around savings products and financial health for employees 
where there's been little innovation in the past.
    Can you talk a little further about what changed in that 
environment that spurred innovation and competition?
    Ms. Hogarth. Thank you.
    Breaking into the employer channel is very, very difficult, 
and one of the things that we have found that is very, very 
helpful is to just do proof of concepts and pilots.
    And by having somebody be bold, to go first and to try out 
something gives other people confidence that they too can do 
it.
    This actually gets to my answer to your original question, 
which is thinking about how bright lines used to work when we 
had a nice segmented marketplace, but there is significant 
blurring of lines right now.
    And thinking about in terms of trends, how we regulate in 
the 21st century not so much with specific rules but perhaps 
with principles and guidelines. For example, thinking about 
consumer outcomes as the metric of success, not whether or not 
your disclosure is in 18 point font.
    Mr. Kinzinger. Very good. Very interesting.
    Well, I thank all of you for your participation. Well, I 
thank all of you for your participation. I will yield back my 
negative 37 seconds, Mr. Chairman.
    Mr. Latta. The gentleman yields back.
    And the Chair now recognizes the gentleman from New Jersey 
for 5 minutes.
    Mr. Lance. Thank you very much, Mr. Chairman.
    My district in New Jersey has a lot of constituents who 
work in the financial services industry either in New Jersey or 
in New York itself.
    Are the innovations in FinTech being driven predominantly 
by start-ups or by the more traditional banking institutions 
and are there partnerships between the two--between start-ups 
and more traditional banking institutions--and I defer to all 
members of the panel.
    Mr. Van Valkenburgh. Some very fruitful partnerships have 
emerged even in the open block chain space. I think in the 
early days many people believed Bitcoin was just a strange 
internet phenomenon. But that has radically changed as block 
chains become a popular almost buzzword in Wall Street and 
elsewhere.
    One particularly exciting partnership to highlight is the 
partnership between Ethereum, Zcash and innovators at JPMorgan 
to build a block chain that will be flexible for smart 
contracts like Ethereum's open block chain network that will 
have some privacy elements taken from the Zcash network and 
that will serve potentially heavyweight enterprise type 
clients.
    Mr. Lance. Thank you. Others on the panel, would you like 
to comment? Yes.
    Ms. Hogarth. So, obviously, JPMorgan Chase is clearly 
involved in trying to stimulate innovation not only outside of 
the bank but certainly within it as well and there are a number 
of other incumbent banks who have their own innovators hubs.
    And I think there are a number of other entities like CFSI 
who are trying to stimulate in the start-up community. So I 
think it is a both end, Congressman.
    Mr. Lance. And are these more traditional forms of banking 
the coordination--are they the American banks or is this also 
true of banks in other parts of the world?
    Ms. Hogarth. Well, certainly, we've seen a lot of 
innovation across the globe. I think we need to look to our 
colleagues in Australia, Singapore, Hong Kong, beyond the U.K.
    The U.K. is always getting lifted up as the--as the 
prototype here. But there are a lot of really great innovations 
coming out.
    But I would agree with Mr. Saade that the U.S. is, you 
know, bar none the leader in this arena.
    Mr. Lance. I, obviously, have a bias toward New York as 
opposed to London or Shanghai or Singapore. Is there something 
that we should be doing here in Congress to make sure that we 
are preeminent in FinTech?
    Mr. Van Valkenburgh. I would say, quickly, that for 
noncustodial developers of these technologies--these open block 
chain networks--the State-by-State money transmission framework 
is a bit of a maze to navigate.
    They are really not money transmitters. They build pipes. 
They don't push the water through the pipes. But they'll have 
to get an opinion from 53 different States and territories from 
the regulator in that jurisdiction that says that they're safe 
and they won't be on the hook for unlicensed money 
transmission, which carries a $5,000--well, no, 5 years in jail 
and potentially multi-thousand-dollar fines.
    So those are very real liabilities and I think they 
frighten people away to some extent from building their 
infrastructure here in the U.S.
    Mr. Lance. This is always a challenge regarding our dual 
sovereignty. What would you recommend that we do? Because we do 
have dual sovereignty in this country.
    Mr. Van Valkenburgh. Yes, and I think the States have a 
valuable role to play as far as licensing custodians of other 
people's digital currency.
    However, I think we do need a Federal safe harbor that 
would basically clarify the legal landscape across all the 
States saying that noncustodial businesses should not need to 
be licensed.
    Mr. Lance. Are there others on the panel who have an 
opinion on that? Yes.
    Mr. Saade. I'm going to take a little bit of a different 
angle and that is something that the Federal Government has 
done for decades is invest in extremely basic seed money and 
basic R&D science and development, which at the end of the day, 
after Defense uses the technology or whatever the technology is 
being used for, the private sector comes in and innovates on 
top of that.
    So one thing I think that, irrespective of are you 
developing clean energy technology or a cybersecurity thing 
that could be applied here or anywhere else to protect our 
borders, that's something the Federal Government can do and is 
the only entity that can do it--spend significant money looking 
into the future.
    Mr. Lance. Thank you. This is a very interesting and 
important topic and I hope that the Commerce Committee takes 
the lead on this issue as we have taken the lead in so many 
areas and it's a very distinguished panel.
    Thank you, Mr. Chairman.
    Mr. Latta. Thank you very much. The gentleman yields back 
the balance of his time.
    And at this time, the Chair recognizes the gentleman from 
Mississippi, the vice chairman of the subcommittee.
    Mr. Harper. Thank you, Mr. Chairman, and thanks to each of 
you for being here.
    Ms. Hogarth, I will start with you, please. The number of 
companies applying to be a part of the Financial Solutions Lab 
is remarkable: 358 for this upcoming group of companies.
    In your testimony you mentioned three key trends from that 
applicant pool, one of them being companies focused on products 
subject to complex regulatory oversight. Understanding that the 
finalists have not been announced yet, can you give us some 
examples of what sorts of services might fall in this category?
    Ms. Hogarth. Sure. You know, just as consumers' lives are 
not sort of unidimensional, the products that our lab companies 
develop are cut across traditional financial services products.
    They're not just a transaction card. They're not just a 
credit card. They're not just a savings product. They feature 
some of those multiple features.
    In our last cohort, we had a company that worked with 
freelance workers. We had a company that was in a loan 
servicing arena, and we had a very interesting company called 
Remedy that looks at medical bills and errors on medical bills 
and how do you help consumers understand what's in their bill 
and protest any duplicative charges, things like that.
    That company actually saved their customers about a 
thousand dollars a year in misbilling on medical products. 
That's not a bank account. That's not a stock or a bond or a 
mutual fund.
    It's not an insurance product. And so there are these kinds 
of really complex kinds of financial issues that consumers face 
where it doesn't fit neatly into a regulatory box.
    Mr. Harper. OK. Thank you.
    Mr. Valkenburgh, you know, we understand that innovations 
in the financial industry have incredible potential to offer 
great benefits to consumers and we are also mindful of consumer 
protections and, of course, privacy concerns.
    Can you speak to the role the FTC can play to ensure the 
latter?
    Mr. Van Valkenburgh. I'm sorry, Congressman. That was the 
FTC?
    Mr. Harper. Yes.
    Mr. Van Valkenburgh. The FTC plays a valuable role 
enforcing unfair and deceptive acts and practices somewhat 
mirrored by the CFPB's authority there.
    However, I think they play a valuable with respect to these 
open block chain networks in that many of the applications that 
people build on these networks will not be custodial and, as I 
suggested, should not therefore be regulated as money 
transmitters.
    You might then ask OK, well, who's going to check their 
code as a regulator, make sure that the app does what it says 
even if the money is not being held by the app designers.
    Unfair and deceptive acts and practices have a long track 
record in making sure that people build their tech right on the 
internet for nonfinancial Web site and I think the FTC can 
continue to play that role with respect to these new open block 
chain networks.
    Mr. Harper. You know, in your testimony you also talked 
about digital assets outside of digital currencies, of course. 
Can you help us understand exactly what those digital assets 
could be, and help me visualize what the future looks like if 
this technology can develop?
    Mr. Van Valkenburgh. Absolutely. So you can think of these 
things as bearer instruments and the bearer instrument we are 
most familiar with is, of course, cash. It's a way of doing 
peer to peer money transfer.
    But there are other bearer instruments in our real world. 
There's tokens for a fairground. There's tickets for a concert. 
There's vouchers for certain goods and services that won't be 
used for other goods and services.
    One particularly exciting network that's being developed is 
called the Interplanetary File System, which I'm really glad I 
get to say here in the subcommittee.
    That is a decentralized cloud storage network that would 
allow people to just use the internet to store files without 
contracting with one or another company like Amazon or Dropbox.
    The way that the files would be stored would be encrypted 
for privacy and then they'd be verifiably stored at different 
places by people running computers who are rewarded for 
providing that storage with a voucher, Filecoin, that can only 
be spent on buying storage.
    Mr. Harper. I mean, it's incredible to comprehend and I'm 
so glad you got to use that phrase, too. That's very good.
    I see my time is almost up so with that I will yield back.
    Mr. Van Valkenburgh. Thank you, Congressman.
    Mr. Latta. Thank you. The gentleman yields back the balance 
of his time, and the Chair now recognizes the gentleman from 
Florida for 5 minutes.
    Mr. Bilirakis. Thank you. Thank you, Mr. Chairman. I 
appreciate it very much and I want to thank the panel for their 
testimony today.
    I will start with Ms. Hogarth. Maybe I mispronounced that. 
I apologize. Hogarth.
    In your testimony you talk about the Financial Solutions 
Lab which helps start-ups focused on improving consumers' 
financial health and outline a few companies.
    One of those companies, Digit, uses an algorithm to help 
people automatically save money without having to move the 
money themselves. Would you, again, tell us more about how they 
made it to your program and what their experiences have been so 
far?
    Ms. Hogarth. So they made it to our program by--once you 
apply to our program, there is a series of evaluations that we 
do. A number of, you know, like, sort of, is this really 
helpful to consumers. CFSI bases a lot of our work on our 
compass principles, which are to build inclusion, build trust, 
promote success and create opportunity.
    And so we always ask people ourselves how much does this 
company help with inclusiveness, trust, opportunity and 
success.
    We do financial due diligence so we look at the business 
model of the company and we also do sort of a--what I will call 
a gut check in is this actually going to improve the financial 
health of U.S. households.
    Mr. Saade's company has helped us in the past in reviewing 
so we are not just looking at these ourselves. We have a number 
of outside and expert reviewers including consumer advocacy 
organizations.
    The company Digit has grown substantially over time. Most 
of the companies in our cohort, our labs, have grown. As a 
matter of fact, they now reach a total of about 10 million U.S. 
households, which is 10 times what they were when they joined 
the program in the beginning.
    So it is really, I think, on the whole the companies find 
it a very positive experience.
    Mr. Bilirakis. OK. Thank you very much.
    This question is for the panel. We'll start with you, Ms. 
Hogarth, if you wish. Many individuals own and run small 
businesses. These businesses power---they are a major part of 
the economy--obviously, jobs, financial well-being. How is 
FinTech and the innovation you are seeing in this space going 
to help small businesses find capital, reduce paperwork or 
filing costs or any other examples you can share? We'll start 
of with you, please.
    Ms. Hogarth. Sure. Well, I think that one of the things 
you've seen in the market over the last several years is new 
business models.
    The marketplace lenders and other kinds of opportunities 
for small businesses to get access to capital is really, really 
important and when we are talking about access to capital you 
have to remember that financial institutions--the incumbent 
financial institutions often don't want to make that $25,000 
loan.
    They want to make the $250,000 loan or the $250 million 
loan. So having an opportunity to serve the market that the 
really small business guy needs--the food truck guy, the guy 
that just needs a pizza oven or a dentist chair--those become 
really, really important.
    Mr. Bilirakis. That's good. Anyone else, please?
    Mr. Saade. Yes. I would say that 30 million or so U.S. 
small businesses, half of them, when you're looking to give 
them credit, it's actually a person credit.
    So at the end of the day, a lot of these small businesses 
actually are basically personal guarantees and all this stuff.
    So that's one thing is that helping consumers access credit 
means that they can start these micropreneurial businesses.
    The other thing is the, like she was saying, has to do with 
the size. Typically, because pools of capital have become so 
big, especially banks and things of that nature, they don't get 
out of bed for anything less than some big number.
    So there's a huge swath of underserved small businesses not 
for any macabre reason other than it doesn't make any business 
sense. So a lot of these innovations actually label you to 
scale the ability to deliver capital to these tiny pipsqueak 
companies which, as you said, are the beating heart of our 
economy. So it's critical to small businesses.
    Mr. Bilirakis. Very good. Would you like to add something?
    Ms. Tetreault. If I may, I just would want to emphasize 
that micropreneur is another thing that can be incredibly 
important is receipt of payment and that faster payments can 
really enable receipt of those funds so long as banks are held 
to make those funds available to consumers upon receipt. The 
gap needs to be closed.
    Mr. Bilirakis. Very good. Thank you.
    Mr. Van Valkenburgh. I would simply echo the rest of the 
panel saying that the reduction in costs of provision of these 
services and potentially the reduction in costs of having a 
robust in order to discover creditworthiness are things that 
open block chain networks can deliver on by streamlining the 
pipes in between, you know, persons, small businesses, big 
companies and making trust and verifiability easier between 
those parties.
    Mr. Bilirakis. Very good. My time has expired, Mr. 
Chairman. I yield back. Thank you.
    Mr. Costello [presiding]. Gentleman yields back. I will 
recognize myself for 5 minutes.
    Mr. Van Valkenburgh, I have a block chain company in my 
district in Berwyn, Pennsylvania--AlphaPoint--who prior to this 
hearing echoed much of the details that you shared today. In 
fact, they're doubling the size of their team, and they expect 
that trend to continue.
    Preliminarily, I'm curious. When we talk about block chain 
technology and job creation and GDP growth, is block chain 
technology creating new jobs or displacing old jobs?
    Mr. Van Valkenburgh. I think that's an excellent question. 
I come from a legal background, and when the term ``smart 
contracts'' started floating around, everyone started 
suggesting that, well, we'll be able to get rid of the lawyers, 
that's great.
    I think the reality is that's simply either too optimistic 
or foolhardy. Really, what you end up seeing is retraining.
    A lawyer, for example, in this space should now learn how 
to code. They should learn how to write a contract that is not 
only embodied in legal terms in written language but also 
potentially embodied in computer code that runs on top of a 
decentralized network.
    So I don't think this leads to substantial job losses. I 
think it does lead to challenges with retraining and I think 
education and efforts to make sure that people are aware of how 
things are changing are important to that end.
    Mr. Costello. I discerned a little bit of disagreement on 
the panel on the issue of FinTech charters, and so I first 
wanted to ask you this question and then open it up to those 
who agree, disagree or maybe have a slightly different take.
    You used an interesting phrase--issue of permissionless 
innovation versus responsible regulation. I think that's what 
you characterized it as, and I get what you're getting at 
because I think there's always that tension when we talk about 
innovation between making sure that regulatory barriers don't 
get in the way.
    At the same point in time, you don't want innovation to 
sort of take advantage of an outdated set of rules or laws that 
creates victims and I think that that's what we are really 
focussing on when you talk about FinTech charters and this 
issue writ large.
    The question that I have for you on FinTech charters is, 
Why do you think that they're needed versus why could it not 
just be being a little bit additive to the existing regulatory 
or legal framework which already exists?
    Mr. Van Valkenburgh. So under existing----
    Mr. Costello. It's a little thing, and it's kind of a big 
step. I would----
    Mr. Van Valkenburgh. Yes. Thank you, Congressman.
    I think under existing regulatory structures in general if 
you want a unified Federal regulator you're going to need to be 
what we traditionally consider a bank.
    You're going to need to take deposits, make loans and maybe 
do check paying or payments. If you don't want to do deposit 
taking and maybe if you don't even want to do loans--you just 
want to do payments--you have no choice for a unified Federal 
regulator. You will have to go State by State and get money 
transmission licensing.
    Now, that is a severe barrier to innovation from a 
permissionless innovation standpoint because you're going to 
have to have 53 conversations across the States and territories 
and explain, well, in many cases what Bitcoin is and that is a 
difficult conversation to have with a State regulator.
    Mr. Costello. Right.
    Mr. Van Valkenburgh. Now, they may be on board with what 
you're proposing long-term but it's a lot of legwork. Now, the 
alternative would be can I get one Federal regulator and I 
think the OCC's FinTech charter presents an opportunity for 
that because they've suggested that they're willing to charter 
banks or, you know, Federal banks who do not do deposit taking, 
who only do payments or only do lending.
    I would add that the controversial nature of the charter 
with respect to some consumer groups I think often focuses on 
aggregation or preemption of State limits on interest rates. 
This is not an issue that we take a position on.
    At Coin Center, we are primarily concerned with payments 
companies getting Federal charters, not lenders.
    Mr. Costello. And I don't see what--I mean, you can have 
preemption, but it doesn't mean everything is preempted.
    Mr. Van Valkenburgh. Precisely.
    Mr. Costello. So I tend to see the argument your way there. 
Others?
    Ms. Tetreault. I would emphasize that it is the preemption 
of those lending caps that raises a particular concern and then 
there also is a question about whether or not there will be 
enough oversight in particularly examination and supervision.
    And then there are the concerns around, obviously, the 
safety and soundness requirements. I think also one other piece 
of it is when it comes to information sharing that there are 
tools available at the State level that may not exist presently 
at the Federal level. So that would need to be addressed as 
well.
    Mr. Costello. But safety, soundness, oversight--could you 
make the argument, though, that given the sophistication of 
this that that might be done better at the Federal level but 
you wouldn't preempt issues such as interest rates, et cetera?
    Because I understand State banking law, but on some of this 
stuff it just strikes me that preemption might be the way to 
not have innovation be hampered by State patchwork.
    Ms. Tetreault. I understand around the duplicative efforts 
and the concerns there and, again, that could be something that 
is more streamlined with a national licensing systems.
    I would not rule that out provided that there are those 
essential safeguards in place and no preemption of those 
lending caps in particular.
    Mr. Costello. Anyone else?
    Ms. Hogarth. I would just like to point out that I have a 
driver's license from the State of Virginia and it lets me 
drive anywhere across the United States.
    And I recently drove in South Africa on the left. So go 
figure. But I still have to obey the State speed limits, and I 
think there's an interesting analogy there.
    Mr. Costello. Thank you.
    Seeing there are no further members wishing to ask 
questions for the panel, I would like to thank all of our 
witnesses again for being here today.
    Before we conclude, I would like to include the following 
documents to be submitted for the record by unanimous consent: 
a letter from Electronic Transactions Association, a letter 
from Competitive Enterprise Institute, a letter from Kaspersky 
Lab, a letter from Intuit.
    [The information appears at the conclusion of the hearing.]
    Mr. Costello. Pursuant to committee rules, I remind Members 
that they have 10 business days to submit additional questions.
    Ms. Schakowsky. Without objection.
    Mr. Costello. Very good. And I ask that witnesses submit 
their response within 10 business days upon receipt of the 
questions. Subcommittee is adjourned.
    [Whereupon, at 11:55 a.m., the committee was adjourned.]
    [Material submitted for inclusion in the record follows:]

             Prepared statement of Hon. Michael C. Burgess

    Good morning. I want to thank Chairman Latta for holding 
this hearing today. When I was chairman of the Commerce, 
Manufacturing, and Trade Subcommittee we held a hearing on 
mobile payments that provided valuable insight into the ways 
consumers pay for goods and services using financial 
technology, or FinTech.
    FinTech provides numerous opportunities for individuals who 
are unbanked, underbanked, or simply looking for banking 
alternatives to access financial services. Advantages of 
FinTech include faster receipt of payments, improved access to 
wealth-management services through broad data acquisition and 
analysis capabilities, increased access to lines of credit and 
cryptocurrencies, and accountability through auditable, 
permissionless, distributed ledgers like blockchain networks.
    One of the reasons FinTech products and services have 
continued to develop is the desire for innovative solutions to 
common financial needs. You can now split a check or buy an 
online item with the press of a button on a mobile device, all 
without thinking about directly involving a banking 
institution.
    In addition, FinTech provides advanced tools to aid 
individuals with financial planning and decision-making where 
such services previously did not exist to such a granular 
level. This capability is especially important for individuals 
who need exact guidance on how to overcome debt or increase a 
savings account balance.
    While FinTech has successfully developed solutions for 
alternative access to financial services, for it to continue 
meeting the needs and desires of consumers it must remain free 
of burdensome and disparate laws and regulations. Congress 
should evaluate ways to hold providers of products and services 
accountable without holding them back from further innovation.
    The maturation of the FinTech industry is a step in the 
right direction for incorporating the unbanked and underbanked 
into the economy as well as providing alternatives for 
traditional financial services. I look forward to learning more 
about this industry, and its barriers to entry, from our 
witnesses today. Thank you.

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