The Consumer Financial Protection Bureau recently released a report highlighting various market developments that have the potential for benefiting consumers. These developments include new products, services and trends that are emerging from fintech startups and traditional financial institutions.
The report also includes an overview of the bureau’s Project Catalyst initiative to promote consumer-friendly innovation and outlines the importance of ensuring consumer protections are built into emerging products and services, according to a CFPB news release.
“Innovation has enormous potential to improve the financial lives of consumers,” CFPB Director Richard Cordray said in the release. “At the same time, market developments cannot skirt the need for strong consumer protection. Through Project Catalyst and other bureau activities, we are working to expand our own knowledge and to foster a consumer financial marketplace where emerging products can be developed that are safe and beneficial for consumers.”
Project Catalyst established an office hours program that has met with hundreds of companies, enterpreneurs and other stakeholders who are on the front lines of financial innovation. This allows the CFPB to better understand emerging market innovations, what works for consumers, and potential challenges facing innovators, the release stated.
According to the CFPB, some of the marketplace developments in the area of innovation include:
• Expanding access to credit: A number of innovators are seeking to expand responsible access to credit to Americans with little or no credit history. Some companies are looking to alternative forms of data and newer methods of analyzing this data to assess an applicant’s creditworthiness.
• Supporting safe consumer financial records access: Project Catalyst has learned of innovative tools for personal financial management that can help families better manage their finances and weather financial shocks.
• Better cash-flow management: Some fintech companies are developing tools to help address challenges posed by a time lag in cash flow for expenses and income, which can cause consumers to incur overdraft fees, forgo needed expenses or make other difficult adjustments. Some services enable employees access to accrued wages earlier than the regular payday, while others deduct a portion of consumers’ wages and apply it to recurring payments to help them better manage the timing and frequency of bill payments.
• Increasing options for student loan refinancing: Project Catalyst has learned of fintech companies that are offering borrowers with high-rate student loan debt the opportunity to refinance at current low interest rates.
• Modernizing mortgage servicing platforms: Some companies are looking to adopt or build modern technology platforms to improve loan servicing and provide more flexibility and scalability as compared with legacy platforms.
• Improving credit reporting engagement: Some fintech firms are developing tools to improve consumer engagement around credit reporting and address issues around accuracy and understanding of credit reports.
• Improving peer-to-peer money transfers: A number of companies are working to make money transfers more consumer friendly. Some companies are providing real-time price comparison services so that people sending money overseas can easily find the cheapest and most convenient ways to do so, while others are developing services for consumers to quickly and inexpensively transfer funds over digital channels.
• Supporting consumer savings: Some companies are offering services designed to help consumers build emergency savings.
Project Catalyst also has conducted several research pilot programs with companies of various sizes that have been designed to help inform the CFPB’s understanding of emerging issues. These pilots have focused on issues such as encouraging consumer savings and improving the effectiveness of early-intervention credit counseling. Other pilot ideas are being considered.
The Project Catalyst report is available at: http://www.consumerfinance.gov/data-research/research-reports/project-catalyst-report-promoting-consumer-friendly-innovation/. More information on Project Catalyst can be found at: http://www.consumerfinance.gov/projectcatalyst.