	Marketplace Lending

Marketplace lending connects consumers and small businesses seeking  online and timelier access to credit with individuals and institutions  seeking investment opportunities. Marketplace lenders use traditional and  may use less traditional types of data and credit algorithms to assess  creditworthiness and underwrite consumer loans, small business loans,  lines of credit, and other loan products. Regulation and Oversight

The regulation of marketplace lenders is largely determined by the  lenders’ business model and the borrower or loan type. For example,  marketplace lenders that provide services through an arrangement with a  federally regulated depository institution may be subject to examination  as a third-party service provider by the federal prudential regulator. The Securities Act  of 1933 generally requires issuers that make a public offering of securities  to register the offer and sale of their securities with SEC and provide  investors with disclosures that include information about the company  issuing securities such as risk factors and financial  information.According to staff from SEC, certain transactions by  marketplace lenders may be exempt from the registration requirements of  the Securities Act of 1933 depending on the particular facts of their  securities offerings. Marketplace lenders are subject to state-level laws in each state in which  they are licensed to conduct business. Some agencies have taken a number of steps to understand and monitor  the fintech industry, including the marketplace lending subsector. Mobile Payments

Mobile payments allow consumers to use their smartphones or other  mobile devices to make purchases and transfer money. Consumers and  businesses use these devices to make and receive payments instead of  relying on the physical use of cash, checks, or credit and debit cards. What It Is and How It Works

According to publications we reviewed, there are different ways to make  mobile payments, including the use of a mobile wallet. Underbanked: FDIC and the Federal Reserve have found that  underbanked consumers use mobile financial services. Digital Wealth Management

Digital wealth management platforms, including robo-advisors, use  algorithms based on consumers’ data and risk preferences to provide  digital services, including investment and financial advice, directly to  consumers. Digital wealth management platforms provide services  including portfolio selection, asset allocation, banking and account  aggregation, and online risk assessments. Distributed Ledger Technology

Distributed ledger technology (DLT) was introduced in 2009 as a  technology intended to facilitate the recording and transferring of bitcoin,  a virtual currency, specifically using blockchain. DLT has the potential  to be a secured way of conducting transfers of digital assets in a near  real-time basis potentially without the need for an intermediary. In 2015, CFTC formed a working group on blockchain, distributed ledger  technology, and virtual currencies to study their application to the  derivatives market and promote understanding and communication  across the agency. We are sending copies of this report to the congressional requesters,  agencies, and other interested parties. Appendix I: Agencies with Oversight Responsibilities Related to Financial Technology Firms

Regulation of financial technology (fintech) firms depends on the extent to  which the firms provide a regulated service and the format in which the  services are provided. Consumers and  Mobile Financial Services 2016. Board of Governors of the Federal Reserve System. Consumer Financial Protection Bureau. Federal Deposit Insurance Corporation. Federal Trade Commission Staff Report. Distributed Ledger Technology:  Implications of Blockchain for the Securities Industry. GAO. GAO. GAO. GAO. IOSCO Research  Report on Financial Technologies (Fintech). Office of the Comptroller of the Currency. The State of State Money Services Businesses  and Regulation and Supervision.
Why GAO Did This Study

Advances in technology and the widespread use of the Internet and mobile communication devices have helped fuel the growth in fintech products and services, such as small business financing, student loan refinancing, mobile wallets, virtual currencies, and platforms to connect investors and start-ups. Some fintech products and services offer the potential to expand access to financial services to individuals previously underserved by traditional financial institutions.
GAO was asked to review a number of issues related to the fintech industry, including how fintech products and services are regulated. This report, the first in a series of planned reports on fintech, describes four commonly referenced subsectors of fintech and their regulatory oversight. GAO conducted background research and a literature search of publications from agencies and other knowledgeable parties. GAO also reviewed guidance, final rulemakings, initiatives, and enforcement actions from agencies. GAO interviewed representatives of federal agencies, including the federal prudential regulators, state supervision agencies, trade associations, and other knowledgeable parties.
GAO is making no recommendations in this report.

What GAO Found

The financial technology (fintech) industry is generally described in terms of subsectors that have or are likely to have the greatest impact on financial services, such as credit and payments. Commonly referenced subsectors associated with fintech include marketplace lending, mobile payments, digital wealth management, and distributed ledger technology.
Marketplace lenders connect consumers and small businesses seeking online and timelier access to credit with individuals and institutions seeking profitable lending opportunities. Marketplace lenders use traditional and may use less traditional data and credit algorithms to underwrite consumer loans, small business loans, lines of credit, and other loan products.
Mobile payments allow consumers to use their smartphones or other mobile devices to make purchases and transfer money instead of relying on the physical use of cash, checks, or credit and debit cards. There are different ways to make mobile payments, including the use of a mobile wallet.
use algorithms based on consumers' data and risk preferences to provide digital services, including investment and financial advice, directly to consumers. Digital wealth management platforms provide services including portfolio selection, asset allocation, account aggregation, and online risk assessments.
Distributed ledger technology was introduced to facilitate the recording and transferring of virtual currencies, specifically using a type of distributed ledger technology, known as blockchain. Distributed ledger technology has the potential to be a secure way of conducting transfers of digital assets in a near real-time basis potentially without the need for an intermediary.
Regulation of these subsectors depends on the extent to which the firms provide a regulated service and the format in which the services are provided. For example, a marketplace lender may be subject to:
federal regulation and examination by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency in connection with certain services provided to depository institutions by the lender;
state licensing and regulation in the states in which the lender conducts business;
securities offering registration requirements administered by the Securities and Exchange Commission if the lender publicly offers securities; and/or
enforcement actions by the Bureau of Consumer Financial Protection and the Federal Trade Commission for violations of certain consumer protection laws.
To learn about the fintech industry, some agencies hosted forums, formed working groups, and published whitepapers and regulatory guidance.