Fintech
The General Assembly makes changes to banking statutes, hoping to spur innovation
Representative Jason Doucette, co-chair of the Banking Committee, explains the FinTech portion of SB 501 on Thursday, June 27, 2024, at the Capitol in Hartford. Credit: Screen / CT-N
HARTFORD, CT – A bill to spur growth in the FinTech sector was part of omnibus legislation passed by both the Senate and House during special sessions Wednesday and Thursday.
The FinTech provision addresses “uninsured” banking entities and will essentially rename the Uninsured Banking Charter to the Innovation Banking Charter in the statute in an effort to attract more financial transaction firms to Connecticut. The bill was forwarded to the state legislature’s Banking Committee DBanking Department.
There are already some banks that are taking advantage of the new charter, because the concept was originally approved in 2022, but the naming convention was later deemed unnecessary to attract more FinTech companies.
Those companies – included Numismawhich recently became the first uninsured banking entity to be granted a master account at the Fed, thereby gaining access to the Federal Reserve’s financial services network, are eligible to be licensed in Connecticut and to conduct banking business despite are not insured by the FDIC. The companies affected by the legislation do not need FDIC insurance because they do not offer retail banking services, such as checking and savings accounts, and do not hold people’s money.
The Banking Department’s website states that “an uninsured bank has all the powers and is subject to the requirements and limitations applicable to an FDIC-insured bank, except that an uninsured bank may not accept retail deposits and is not required to comply with community reinvestment laws.”
Speaking during the House debate Thursday, Rep. Jason Doucette, a Manchester Democrat and co-chairman of the Banking Committee, said there will only be a “handful” of companies operating under the charter, but the state will benefit from their presence. and growth. .
The main benefit of becoming an “innovative” bank in Connecticut is that, under this charter, financial institutions will have direct access to payment processing networks like Visa and Mastercard, rather than having to use a third-party provider. They can process their transactions through the Fed’s financial services network.
Matt Smith, director of government relations and consumer affairs for the state Department of Banking, said Thursday that the card is unique to Connecticut and a few other states.
“Part of the vision here is to try to create a cluster of FinTech companies in the Fairfield County/Stamford areas,” Smith said Thursday on Capitol Hill as the House debated.
Smith said Connecticut will be responsible for regulating eligible banks and that allowing such banks into the state will bring some benefits, including increased tax revenue.
“[The change] it reduces costs for them, which incentivizes these types of companies to come to the state because it’s cheaper for them to do business,” he said.
The first company to arrive in Connecticut with the new charter, Banking Circle USis now headquartered in the Stamford area, according to a January announcement by Gov. Ned Lamont and other officials.
“Connecticut is quickly becoming the destination of choice for fintech companies to grow and prosper,” the governor said.