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Subcommittee debates federal coordination on fintech, AI and access to payment rails
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Summary
Members and witnesses discussed regulatory sandboxes, uniform licensing, AI accountability, and possible access by nonbank fintechs to Federal Reserve payment rails. Industry urged clarity and uniformity; consumer advocates warned against weakening protections or relying solely on state regulation.
Lawmakers at a House Financial Services subcommittee hearing on Feb. 27 pressed industry and consumer groups about the regulatory framework for fintech, the role of AI, and whether nonbank fintechs should gain access to Federal Reserve payment services.
Jody Kelly of the Electronic Transactions Association emphasized the economic scale of digital payments and urged a technology‑neutral, activity‑based regulatory approach. "Payments have evolved from cash and checks into a secure digital ecosystem that underpins daily economic life," Kelly said, and urged targeted federal leadership on fraud and AI.
Members raised the costs startups face complying with a patchwork of state licensing regimes and asked whether regulatory sandboxes or a uniform federal approach could reduce barriers. Witnesses, including Stream and Earnin representatives, supported sandboxes as a way for regulators and firms to test products with guardrails. "We knocked on the door of the Financial Conduct Authority, the FCA, and said, we want to do this. How can we work with you to do this?" Kevin Lefton recounted regarding the U.K. experience.
Consumer advocates and some members warned that piecemeal state action and weakened federal enforcement could fragment national payment systems or leave consumers unprotected. Delicia Reynolds Hann urged transparency and human review when AI is used to approve or deny financial products and called for independent audits, opt‑out rights and public reporting of bias testing.
Several members asked about access to Fed payment rails (FedNow, Fedwire) and concepts such as a "skinny" master account for nonbank fintechs. Industry witnesses said discussions are early and urged that any expanded access balance innovation with safety and soundness requirements, including anti‑money‑laundering and consumer protections.
The committee set a deadline for witness responses to written questions and adjourned. No regulatory actions were taken at the hearing.
