Regulate Early or Later: Open Banking, Fintech and Innovation

At a relatively recent international conference, I discussed how the United States generally tends to take a hands off approach to regulating new technologies which create new markets at the outset of the development of the technology.  For the most part, we allow the market to sort out the best way for the technology to develop and be deployed to consumers.  The downside with this approach concerns public choice issues.  Once the industry develops and matures—along with obvious problems, such as privacy, consumer safety and competition concerns—there tend to be issues associated with regulating that industry and the problems created.  The relatively more mature industry may attempt to capture agencies and exercise considerable influence over our politicians and other parts of government.  This is tricky because we avoid overregulating early and dampening the development of new markets and technology, but we also tend to under-regulate and…

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