Banking Fintech

America’s banking regulations strangle innovation

America's banking regulations strangle innovation and US banks. Composite image: patrice6000 and Aleksey Stemmer,
Written by Chris Skinner

Chris Skinner bemoans the state of innovation from US banks, blaming draconian regulations and Dodd-Frank.

While almost 500 banks failed in the US between 2008 and 2012, only three new banks opened.

Only three new banks have opened in the US since 2010. Before the financial crisis, over 100 banks set up shop each year, on average, according to data from the Federal Deposit Insurance Corporation, the agency that approves new banks.

Why? Why is the US failing at banking innovation? In the UK, over 30 new banks are launching, many of them digital. In Germany, there are a number of innovative, new banks. Across Europe, Africa and Asia, we see digital innovation, from Alibaba to M-PESA to mBank. What is there to discuss in America? Urmmm …

I was asked the question the other day as to why there is no new digital bank startup in the US, and was stuck for an answer. I wanted to say Moven or Simple, but Moven partners with CBW and Simple is part of BBVA. Radius and a few other community banks are innovating in US markets, but where is the flagship digital startup? GS Bank? Not really, as it’s been launched by Goldman Sachs. Bluebird? Not really – it’s a joint venture between Walmart and American Express based on a card. Tangerine? Not really – it’s Canadian and owned by ScotiaBank.

To be honest, it’s bemusing. If I look at a conference like American Banker’s Digital Banking 2016, there’s not a single new bank on the list, except maybe Fidor. But Fidor is launching in America with a bank behind it, so becomes another Simple or Moven.

What’s the problem?

Duh … regulations. Dodd-Frank was like a boa constrictor on the US banking industry and has not only made big banks more stable, but created zero interest in launching a new bank in US markets. Bank-like operations, yes, which is why we see the fintech world exploding in Silicon Valley and New York, but a bank? No way.

In fact, while America dominates investment banking, which some would claim is higher systemic risk, their regulations for retail banking are quite draconian. This is best summed up in a column in TechCrunch I spotted the other day: Why Britain is beating the US at financial innovation.

READ NEXT: Three of Europe’s most innovative banks are in Germany

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Composite image: patrice6000 and Aleksey Stemmer,

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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