When Fintech Makes the Rules, We All Get Hurt — But the STABLE Act can Help

Image courtesy of Fran Simó via Flickr Creative Commons

When banks and technology companies make the rules, people get hurt.

On December 2, Reps. Rashida Tlaib, Jesús “Chuy” García, and Stephen Lynch introduced a into Congress to digital payment tools at a time when technology companies such as Facebook and Apple are pursuing banking and financial services. The would require companies to obtain a bank charter before issuing digital currencies and subject them to the same regulation and oversight as banks. In announcing the bill, Rep. Tlaib the importance of protecting marginalized groups against new forms of exploitation already in the context of banking and financial services.

Digital currency supporters and the broader fintech community the bill on these same terms. They claimed that regulation and oversight would marginalized groups by stifling innovation and raising the costs of banking. Supporters have long technology’s for expanding access to banking and financial services, and the line between banks and technology companies is . Buzzwords like “innovate,” “disrupt,” and “reshape” frequently appear alongside purported solutions to banking’s entrenched , , and disparities. Stuart Levey, the CEO of Facebook’s Libra Project (recently Diem), developing their digital currency “in a way that promotes financial inclusion — expanding access to those who need it most.”

Any enthusiasm for fintech that lacks a critical analysis of power fails to calculate adequately the disparate harms to marginalized groups. And while harms disproportionately hurt marginalized groups, they ultimately injure us all.

Fintech requires people to relinquish power in exchange for banking and financial services, which is highly consequential in our system of . Distributions of and power are already unequal. And frequently their workers in the name of innovation, including Black, Brown, immigrant, and poor white peoples and women.

Under the of financial , fintech expands the surveillance state while the concentration of wealth and power. By sacrificing their in order to participate, fintech subjects Black, Brown, immigrant, and poor white peoples and women to ubiquitous, targeted that they are already experiencing in other contexts like , , , and . Banks deploy algorithms that a person’s digital information for developing new risk-based investment products and generating profits the person will never receive. At the same time, banks use a person’s digital information to make lending decisions, perhaps charging a or offering a product for exacting the greatest profit.

Banks and technology companies set the terms so they can win either way. Quickly and quietly, they ensconce profits into the accounts of wealthy corporations and predominantly white shareholders.

This obfuscation makes it difficult — if not impossible — for individuals to exact justice for institutional harms, demonstrating unequal distributions of power and the need for regulation and oversight. I recently a branch manager who had received numerous complaints from customers about the bank’s mobile smartphone application. Customers would check their account balances before making purchases, only to have transactions so that subsequent purchases triggered overdrafts. Customers came into the branch to dispute the fees. The branch manager dismissed the complaints until she experienced these “disappearing transactions” herself. She began carefully documenting her experiences, noting that the banking app made it difficult to collect direct evidence by preventing in-app screenshots. The branch manager was suspicious of the bank’s digital engineers. After being rebuffed by her supervisors, she began to think “disappearing transactions” was an intentional of the app instead of a glitch.

Technology further disguises harms that banks conceal through divisions of labor and isolation of individual customers. Even if individual customers became aware of each other’s experiences with their bank’s mobile app and collectively protested unjust fees, mandatory arbitration clauses in their accounts’ fine print would lawsuits and force them to settle disputes. Even if individual users of a company’s digital currency could identify whether their data were inappropriately shared with third parties or the implications of their constant surveillance, they face the task of pursuing redress through a system. People — individually and collectively — struggle to resist what banks and technology companies have worked hard to disguise.

We need and deserve regulation and oversight to banks and technology companies from further stripping people of their power. Many Black and Brown scholars and activists have been for this for years, and most people stronger regulation and oversight. A 2020 of likely voters found that 91% believed it was important to regulate banking and financial services and 74% believed it was important to hold banks accountable. In a separate , likely voters expressed concern about technology companies’ expansion into banking when 62% opposed the use of social media data in credit reports.

We must not tolerate disparate harms, increased surveillance, and closed paths to justice in service of innovation. Legislation like the STABLE Act — policy that centers the dignity and worth of marginalized groups — helps to ensure that banks and technology companies do not make the rules at all our expense. Through strong regulation and oversight, we push against banks’ and technology companies’ concentrated power and loosen their grip on public life. And in doing so, we create the necessary space to shift power toward our collective interests and the public good.

Terri Friedline (@TerriFriedline) is an associate professor of social work at the University of Michigan, and the author of “.”

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Terri Friedline

Democratized finance, consumer protections. Author: Banking on a Revolution (2020)