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The past year has seen a steady stream of regulatory updates and requests for industry feedback, addressing issues from credit card late fees to data-sharing protocols. As 2025 approaches, the regulatory landscape appears poised for potential upheaval, with speculations of a deregulatory agenda under President-elect Donald Trump’s administration. This could lead to a radical shift, possibly including the dissolution of entire regulatory bodies.
However, key challenges persist, including bank-FinTech partnerships, cybersecurity, capital requirements, and fostering innovation. These underlying issues will remain focal points for financial services regulation in the year ahead.
Bank-FinTech Partnerships: Navigating Risks and Rewards
The Synapse bankruptcy and its resulting disruptions, where tens of thousands of customers faced difficulties accessing their funds, have highlighted vulnerabilities in bank-FinTech partnerships. This incident continues to send shockwaves through the sector, emphasizing the need for stronger safeguards. Regulatory agencies are already exploring additional measures to ensure banks manage these risks effectively.
In July, three federal bank regulators announced their intention to take further steps to strengthen oversight of bank-FinTech arrangements. This includes redefining record-keeping standards and improving transparency in partnership agreements.
Enhanced Oversight of Financial Arrangements
The Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) have collectively issued a request for information to address the intricacies of bank-FinTech collaborations. Their focus spans deposits, payments, and lending services, emphasizing the need for accurate and daily reconciliations of custodial accounts to protect individual fund owners.
The FDIC has also proposed a new rule requiring insured banks to maintain precise records for custodial accounts managed by third parties, including FinTech firms. This initiative aims to enhance consumer protections and minimize risks associated with fund mismanagement.
Consumer Protection: Fees, Open Banking, and BNPL
The Consumer Financial Protection Bureau (CFPB) continues to face scrutiny from Congressional Republicans, with potential changes looming as Trump assumes office. Despite challenges, the CFPB has been proactive, recently expanding open banking regulations to include payment apps and data brokers. Notably, banks are now prohibited from charging consumers for data access via APIs.
A new CFPB rule set to take effect on October 1, 2025, will cap overdraft fees at $5 for banks and credit unions with over $10 billion in assets. Legal challenges are ongoing, reflecting resistance to many of the bureau’s initiatives.
The CFPB has also turned its attention to buy now, pay later (BNPL) providers, requiring them to comply with credit card-style disclosure rules. This move has sparked legal battles, with critics arguing that the rules fail to account for the unique nature of BNPL products. A lawsuit by trade associations claims the rule is “arbitrary and capricious,” asserting it does not adequately address the operational realities of BNPL offerings.
The Future of the Credit Card Competition Act
The fate of the Credit Card Competition Act rests in the hands of a Republican-controlled Congress. If passed, the act would push Visa and Mastercard to lower interchange and network fees and mandate the inclusion of alternative networks for merchants. However, with a slim Republican majority in the House and stronger control in the Senate, its prospects remain uncertain.
What Lies Ahead
As the financial services industry navigates these regulatory developments, 2025 remains a pivotal year. Whether the Trump administration ushers in a radical deregulatory shift or maintains the status quo, financial institutions must prepare for a dynamic regulatory environment. Time will reveal the extent of these changes and their impact on the sector.
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