In what could be seen as another salvo in the battle between fintech "distruptors" and more traditional financial institutions, five large technology companies — Google, Amazon, Apple, PayPal and Intuit — have formed a lobbying and advocacy group dedicated to financial issues.
Financial Innovation Now, which announced its existence on Tuesday, is likely being formed as a defensive measure against banking groups which have been arguing that many fintech companies are not subject to regulations that financial institutions already face.
"The companies formed this group to have a voice in Washington and speak on behalf of not only themselves but all the innovators out there," said Brian Peters, the executive director of Financial Innovation Now. "There's a tremendous amount of investment in this area, and many startups working on all manner of products and services."
The group will advocate for financial technology companies and has no plans to add financial institutions as members, said Peters, who previously served as director of government relations for BlackBerry.
"Banks have plenty of places to speak their voice when it comes to the policy conversations that are happening," he added. "And there are also certain things that both sides agree on. But [Financial Innovation Now] is just focused on presenting a unified voice for tech innovators to policymakers. Innovation is here right now, and there's more coming every day."
Peters said that the group will also tout how many of the new technologies and platforms that have come to fore in recent years have been crucial in helping small businesses flourish by enabling easier access to working capital and loans, offering analytical tools to make strategic, data-driven decisions, and strengthening authentication and security.
"We think that's also a great story that needs to be heard in Washington," he said.
Earlier this year, The Clearing House, a trade association of the 24 largest banks that also operates a bank-centric payments system, released a white paper arguing there is an un-level playing field between banks and "alternative payment providers." The group outlined both regulatory and legislative reforms it said were needed to bring more parity.
Brian Knight, associate director with the Milken Institute, believes it is "very likely" the group's formation is a response the narrative coming from the banking industry.
"You can imagine a group like this now saying to lawmakers, 'We are not like them, we should be regulated relative to what we are and what we do, as opposed to banks who pose different risks,'" Knight said.
But Knight said it's not just as simple as "banks vs. fintech" because the banking industry is not uniform in its attitudes towards tech companies.
"Some banks are turning into the wave and embracing either home-grown innovation or partnering with outside tech firms; their view is that it's beneficial and it's going to happen anyway," he added. "Others seem to be more resistant to that outlook, and view them more as competitors and less as collaborators. There's good arguments in both camps."
The formation of Financial Innovation Now may also provide a clue to the long-term plans of companies that have heretofore just tipped their toes in financial services, like Apple and Google, Knight said.
"It's seems to indicate they plan to stay in this space for a good, long while; and not only continue their current offerings but expand on that," he said. "It seems like an acknowledgement that they understand financial services is different, there is a need to engage with regulators and policymakers."
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