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Regents of the University of California




Finance startups are offering automated advice, touchless payments, and other products that could bring great societal benefits, including lower prices and expanded access to credit. Yet unlike in other digital arenas in which American companies were global leaders, such as search engines and ride hailing, the U.S. has lagged in consumer finance. This Article posits that the current competition framework is holding back consumer financial innovation. It then identifies a contributor that has yet to be articulated: the organizational design of administrative agencies. Competition authority—including antitrust and the extension of business licenses—is spread across at least five regulators. Each is focused on other missions or industries. The Federal Reserve and other prudential regulators prioritize financial stability, which conflicts with their competition mandate. The Department of Justice (DOJ), hindered by statutes and knowledge gaps, devotes significantly fewer resources to banking than to other industries in merger review. No regulator has the right authority, motivation, and expertise to promote competition in consumer finance.

Innovation has raised the stakes for fixing this structural flaw. If allowed to compete fully, financial technology challengers (“fintechs”) could bring large consumer welfare advances and reduce the size of “Too Big To Fail” banks, thereby lessening the chances of a financial crisis. If allowed to grow unchecked, either fintech startups or the big banks acquiring them may reach the size of technology giants, thereby increasing systemic risk. Whether the goal is to benefit consumers, strengthen markets, or prevent crises, a reallocation of competition authority would better position regulators to navigate the future of innovation.

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