USA Law and Practice Contributed by: Margo H. K. Tank, Michael Fluhr, Deborah Meshulam, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Meghan Carey, Kathleen Birrane and Eric Hall, DLA Piper LLP
1. Fintech Market 1.1 Evolution of the Fintech Market The responses provided below are based on events and activities which occurred in 2024. US law and policy is currently under review by the Trump administration and material changes may be forthcoming. Contact DLA Piper for the most up-to-date information. The range of products and services being offered by innovative fintech business continues to expand. Fintechs often partner with traditional banking institutions rather than independently competing – eg, for point-of-sale financing or payments, lending, real-time payments, trading, tokenising real world assets, and investing. Perhaps one of the most anticipated changes in the US fintech market will be the shift in the regulatory clarity regarding technology, including in artificial intelligence (AI) and digital assets. The market reacted positively following the re-elec - tion of President Trump. On 20 January 2025, he issued an Executive Order (EO) to promote US leadership in the digital asset and artificial intelligence industry. Importantly, Trump directed the provision of “regulatory clarity” and “well- defined jurisdictional regulatory boundaries” . While disallowing central bank digital curren - cies, and revoking restrictions related to adverse accounting restrictions, the EO established a working group charged with submitting a report that proposes a federal regulatory framework for digital assets, including whether the US should have a national digital asset reserve. Prior to the change in administration, bank part - nerships were subject to increased scrutiny over the last 12 months from both federal and state regulators, in parallel with an increase in enforce - ment actions by multiple US regulatory agencies
in 2024 that targeted fintech relationships. This is expected to change, given the objectives of the new administration. Outside of the regulatory environment, exponen - tial advances in AI, particularly large language models/generative AI, has led to similarly expo - nential industry enthusiasm towards adoption of the technology. While institutions are still learn - ing about the nature of the available tools, finan - cial service institutions are increasingly employ - ing AI for customer service (such as chatbots), credit scoring, authentication, fraud detection, and personalised financial advice. Conversely, financial service institutions are coping with an onslaught of AI-enabled threats to existing sys - tems, such as deepfakes or synthetic identities. 2. Fintech Business Models and Regulation in General 2.1 Predominant Business Models Industry-recognised fintech verticals that cur - rently predominate in the US include the follow - ing. • Mobile payments – the use of mobile devices to engage in payment transactions as an alternative to using cash or plastic credit cards. • Online banking and lending – the offering of traditional banking services and lending ser - vices in a digital environment, which may be provided by the bank alone or in partnership with a fintech. • Banking as a service (BaaS) – this allows fin - tech, non-bank organisations to offer banking services to their customers by leveraging the infrastructure and capabilities of a licensed bank.
966 CHAMBERS.COM
Powered by FlippingBook