A fine line between innovation and regulation for fintech industry

One reason why Uber can tout itself as one of the most successful companies this decade is its ability to push the boundaries when it comes to the regulations that govern the industry it operates in. 

And the company doesn’t shy away from this strategy.

“There are times we look at a regulation and it’s unclear and we’ll push pretty hard to try and work with the regulators,” Brian Crist, chief payments counsel for Uber, said this past week during a discussion panel about regulation and innovation at the annual Money 20/20 conference in Las Vegas. 

“There are companies that see the gray [in regulation] and they’ll retreat,” he said. “We haven’t done that. A lot of our business wouldn’t be in place if we hadn’t pushed the dialogue.”

Crist participated with several companies in a panel discussion about the potential threat from regulators who might stifle innovation with burdensome and unnecessary laws. And let’s face it, with the payments industry and companies on the fringe of this space such as Airbnb and Uber pushing what’s possible in customer engagement, governments worldwide want to make sure its citizens benefit from this shift. 

“It is really hard to balance all those things,” Adrienne Harris, who is a special assistant to the President for Economic Policy, said about potential frameworks to balance innovation and regulation. “One thing we’re working on is engagement, you have to be engaged with the industry, regulators, and consumers.”

Youssef Sneifer, assistant general counsel at Microsoft, told audience members that complexity in today’s payments industry makes it more difficult than ever for governments to understand how companies try to innovate. 

While Harris’ comment about engagement resonates across the industry, executives often find it difficult to explain complex issues to regulators from various agencies because payments systems have become a structure with many moving parts. 

“We have to accept the fact that we live in a complex world,” Sneifer said. “Companies are no longer optimizing for one product. They are combining software, hardware and payments. 

“We have to be sympathetic to how the regulators are seeing this. We have to educate and be educated.”

Sneifer took a moment to acknowledge how funny he sounded asking the payments industry to show sympathy for regulators, given Washington, D.C.’s reputation, but he said the barrier to entry in this market gets lower by the day and this continues to add to the complexity of things. 

One of the longstanding issues companies such as Uber and Stripe have with regulators is the number of different agencies they might have to answer to, as well the communication, or lack thereof, between those entities. 

“The challenge is, how do you get all those institutions to talk to each other,” Crist said. “They should start to talk to each other and put the pieces together. I do think that stifles innovation. How do we get to that kind of coordination between different institutions?”

John Zieger, general counsel at Stripe, pointed to the European model as an example of how Crist’s plea could be answered. 

“You have a single, lone regulator [in the European Commission],” he said. “It’s a much more coordinated regime by design. I don’t think it’s the [complete] answer but I do think there are some things we can learn from that.”

While these issues are being figured out, Crist encouraged the industry to continue to push the boundaries of the law without stepping over the line. 

“There should be companies that are pushing the boundaries,” he said. “You can help drive the regulatory agenda.”

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