Spurring innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants is the aim of a new office created within the federal consumer financial protection agency (and replacing another), the agency said Tuesday.
According to the Consumer Financial Protection Bureau (CFPB), its new Office of Competition and Innovation replaces an earlier iteration of the office (the Office of innovation, opened in 2018) and Project Catalyst (launched in 2014). The bureau said the former focused on an application-based process to confer special regulatory treatment on individual companies.
More specifically, the bureau said the primary purpose of the former innovation office was to process applications for “no action letters” and “sandboxes” that applied to an individual company’s specific product offering. “After a review of these programs, the agency concludes that the initiatives proved to be ineffective and that some firms participating in these programs made public statements indicating that the Bureau had conferred benefits upon them that the Bureau expressly did not,” the agency said.
The bureau said the new office will “support a broader initiative by the CFPB to analyze obstacles to open markets, better understand how big players are squeezing out smaller players, host incubation events, and, in general, make it easier for people to switch financial providers.”
The CFPB added that the competition and innovation office will focus on how to create market conditions “where consumers have choices, the best products win, and large incumbents cannot stifle competition by exploiting their network effects or market power.”
The agency also provided a laundry list of tasks the office will take on. Those include:
- Giving consumers their “walking rights” to switch financial services providers;
- Researching structural problems that block success in innovation;
- Understanding how bigger players can gain advantage over smaller players;
- Identifying ways to address commonplace obstacles;
- Hosting events to explore barriers to entry and other obstacles.