Lawmakers on the House Financial Services Committee grappled Wednesday with the urgent question of whether the nation’s financial regulatory framework, largely designed for traditional deposit-taking banks, remains adequate for an economy increasingly driven by software platforms, digital assets, and artificial intelligence. The hearing, titled “Future of Payments: Promoting Innovation and Fair Markets,” brought together FinTech leaders, banking representatives, and consumer advocates to debate the necessity of a new regulatory lane for payments companies that neither accept deposits nor make loans but have become central to modern commerce.
The Case for a Federal Payments Charter
A central theme of the discussion was the perceived mismatch between current regulations and the operational realities of modern payments firms. David L. Portilla, partner and co-head of the Financial Institutions Group at Davis Polk & Wardwell, testified that while state banking systems have historically fostered innovation, the existing framework begins to break down when payments companies attempt to operate nationwide. He noted that a company must either navigate ‘a multistate framework that is not fully interoperable’ or seek ‘a national bank charter that is not really fit for purpose.’ Portilla suggested Congress has an opportunity to create a federal payments framework specifically tailored to companies whose primary business is moving money.
Eileen O’Mara, vice chair of Stripe, strongly advocated for a dedicated federal payments charter. She explained that the current regulatory environment forces payments companies into an outdated dichotomy: ‘You’re a banker, you’re not a bank.’ For a company like Stripe, which supports approximately 5 million businesses, this framework is ‘not fit for purpose.’ O’Mara highlighted that Stripe operates under a ‘patchwork quilt of licenses across every state’ and seeks to be supervised according to its actual activity—payment processing—rather than the deposit-taking and lending functions of traditional banks.
Empowering Businesses Through Modernization
The practical implications of regulatory modernization for businesses, particularly small enterprises, were a key point of discussion. Rep. Pete Sessions, R-Texas, steered the conversation toward the everyday needs of businesses, to which O’Mara responded that they primarily seek to ‘grow their business reliably and how can they get access to their funds quickly.’ She cited Housecall Pro, a platform whose tradespeople can receive immediate payment after completing repairs, as an example of the tangible benefits of faster settlement. O’Mara underscored that for the ‘5 million businesses that are on Stripe, most of those are small businesses,’ and their ‘access to that money quickly is fundamental to their ability to plan,’ pay employees, purchase inventory, and manage suppliers.
Rep. John Rose, R-Tenn., further argued that payment-specific charters could help preserve the United States’ position as a FinTech leader while maintaining the dual banking system. He warned that without an evolving chartering framework, ‘we risk falling behind.’ O’Mara echoed this sentiment, stating that while the U.S. does not lack entrepreneurs, ‘The failing we have at the moment is the infrastructure doesn’t meet their ambitions,’ pointing to jurisdictions like the United Kingdom and European Union that already offer broader payment-system access. Portilla also referenced the GENIUS Act as demonstrating ‘the power of having … legislation to foster investment and innovation.’
Balancing Innovation with Stability and Protection
Not all witnesses agreed on the necessity or form of new charters, particularly concerning access to Federal Reserve master accounts. Paige Pidano Paridon, executive vice president and senior associate general counsel at the Bank Policy Institute, cautioned against what she described as ‘regulatory arbitrage.’ Paridon stated that ‘Institutions seeking novel charters seek access to the Federal Reserve payment infrastructure and the implicit imprimatur of federal oversight without accepting the full scope of those obligations. That is not a formula for innovation. It is a formula for regulatory arbitrage, and for the gradual erosion of the safety and soundness standards that protect the American public.’ She emphasized that banks are already innovating with real-time payment networks, tokenized deposit platforms, and blockchain-based treasury services, demonstrating that innovation and prudential regulation are not mutually exclusive.
Tara Flynn, policy director of the National Community Reinvestment Coalition, highlighted the importance of consumer protections. She suggested expanding Electronic Fund Transfer Act protections to newer payment methods, including wire transfers, stablecoins, and scams where consumers are tricked into authorizing payments themselves, ensuring existing safeguards apply more clearly.
The Horizon: AI, Stablecoins, and Emerging Risks
The hearing also ventured into future technologies, including artificial intelligence and agentic commerce, where AI systems might initiate transactions on behalf of consumers. Rep. Bill Foster, D-Ill., raised questions about potential issues, such as unauthorized transactions and fiduciary responsibilities. Paridon acknowledged these as significant concerns, asking, ‘What happens if an agent executes a transaction or makes a payment that it wasn’t authorized to do?’
O’Mara, while calling agentic fraud ‘a very topical conversation,’ asserted that current safeguards prevent AI systems from acting independently, stating, ‘It would be impossible for an agent to go rogue today,’ as ‘a human has to authorize that.’ She stressed the need for payment companies to collaborate with governments to establish appropriate standards as this technology evolves. Rachel Anderika, head of global operations at Anchorage Digital, argued that AI strengthens the case for expanding the regulatory perimeter, noting that Anchorage is already building fraud detection directly into the technology layer. Anderika described ‘Agentic payments’ as ‘really where the future of commerce is going’ and called the regulatory perimeter a ‘national asset’ that should encompass responsible innovators.
The debate over modernizing payment regulations underscores a fundamental tension: fostering rapid technological advancement while safeguarding financial stability and consumer trust. As the financial system continues its swift evolution, Congress faces the complex task of crafting a framework that supports innovation without compromising the foundational principles of oversight and protection.
