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At this point it's too early to tell just what the regulatory landscape for mobile payments will look like as adoption increases. Agencies at every level are looking at how the combination of two of the most regulated industries around — telecommunications and financial services — should be overseen as the market develops.
Now one of those agencies is looking past the regulation to foster the actual development of the technology. It's a development that could have some interesting ramifications for mobile payments.
The Consumer Financial Protection Bureau, the agency given oversight of consumer financial products and services, has launched Project Catalyst, a program it hopes will foster innovation and entrepreneurship in the financial services market. The bureau said it sees Project Catalyst as a means of fulfilling its regulatory mandate to give consumers access to fair, transparent, competitive, and innovative markets.
In a speech delivered in Silicon Valley to announce the initiative, Richard Cordray, the director of the CFPB, referred to his year-old bureau as a startup itself and said the program demonstrates a new mindset in how regulators view their role in overseeing the financial services market. It's a role some people might question, he said.
"One might legitimately ask, 'What does government have to do with [innovation]? Is not innovation the business of the private sector operating in the free market?'" Cordray said.
But Cordray believes the role of the CFPB should be as much about creating new ways for companies to serve consumers as it is about regulating existing products and services.
"(W)hat we have found is that regulators often can impede innovation," Cordray said, "by not recognizing its importance for consumers and by freezing people who want to try new things but cannot get any straight answers about how to deal with the risks of regulatory uncertainty or novel issues of how existing laws will be applied to unforeseen products and approaches."
The CFPB said that Project Catalyst will help it engage more closely with companies and entrepreneurs who are at the front lines of innovation. The Bureau has been working with "the innovation community" already, it said, and has even established a website meant to provide access to and communication between the CFPB and innovators.
In its announcement of Project Catalyst, the CFPB laid out several goals of the program. It said Project Catalyst would establish communication between innovators and regulators, help regulators understand new developments, and engage with innovators to bring consumer-friendly ideas to market.
"We want entrepreneurs to be able to come to us with new ideas where they feel that collaboration would help them press forward with a consumer-friendly financial innovation," Cordray said. "These collaborations will be designed to help us and the other parties understand what works and does not work for consumers."
The first companies to link up with the CFPB through Project Catalyst are working primarily with consumer data. The CFPB said it will be working with three companies to analyze consumer behaviors and trends, based on that data. The intent is to use the findings to inform policy decisions. Cordray said the program will continue to find ways to help innovators in financial services and technology
"New technologies, developed by entrepreneurs to process or personalize the most critical information, can empower people and create the potential for great advances in consumer satisfaction," Cordray said. "Through Project Catalyst, we hope to identify and work with innovators who are experimenting with new approaches to informing consumers and to learn from their experiences."
The CFPB said entrepreneurs and innovators can learn more by visiting the newly launched website for Project Catalyst.
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