Updating Banking & Fintech Antitrust Regulation

Abstract

The banking industry is changing faster than ever as fintech acquisitions become more common and fundamentally change the way in which banks operate. With the fintech industry valued at over $100 billion and bank conglomerates such as Goldman Sachs, Citigroup, and JP Morgan making fintech acquisitions almost monthly, regulators have been unable to keep up with the pace of innovation and consolidation within the financial services industry. While antitrust frameworks exist within banking including the Sherman, Clayton, Bank Merger, and Dodd-Frank Acts, they have not blocked a bank merger since 1985 and do not cover considerations that should be made in fintech acquisitions specifically. As a result, consolidation has already created severe consequences for consumers including reduced availability and increased cost of financial services since fintech acquisitions are rarely screened or questioned. Since regulators do not understand the numerous fintech acquisition types, a typology defining fintechs will be created and organized on variables such as purpose, usage, and effect on consumers. Case studies will be conducted including a deep-dive into the failed Visa/Plaid merger, an investigation on JP Morgan’s fintech acquisitions and how they promote or limit competition, and international precedent set by China and India’s regulatory actions. Finally, this article will recommend and defend policy changes that will enhance competition within the financial services industry, improve stakeholder welfare, and ensure financial stability for the US government to consider and adapt. This research concludes with two main findings: fintech acquisitions by banks pose a high threat to competition and consumer welfare as hypothesized and fintechs when operating independent of banks are the only true players that can lessen bank power. In addition, the article provides crucial legal research and jurisprudence that can be applied to future bank and fintech antitrust questions.