Coalition for Financial Ecosystem Standards (CFES) Launches to Develop Industry Standards for Nonbanks Participating in Financial Services
A newly established group, called the Coalition for Financial Ecosystem Standards (CFES), has been created by industry leaders to set guidelines that enhance safety and security for companies offering financial services outside traditional banks.
CFES was established in collaboration with leaders from the financial services industry to tackle a major issue facing the sector: the growing influence of bank partnerships on the development and innovation of financial services. Although these partnerships are essential for creating new financial products and services, ongoing regulatory concerns about these collaborations have affected their effectiveness.
"The introduction of CFES represents an important advancement in fostering collaborative relationships with innovative banks in our financial system," said Sima Gandhi, one of the founders of CFES. "Our goal is to unite various players in the industry to create structures that enhance risk management and compliance, while also safeguarding consumer options and ensuring fair competition."
Members of CFES offer a variety of financial services, such as loans, deposit accounts, card production, payment processing, and open banking services, to name a few. This varied membership, which includes companies like Block, Brex, Mercury, Relay, Rho, and Stripe, guarantees that the standards maintain a high level of compliance that aligns with the latest technologies and the evolving criteria for partnerships with banks. Additionally, CFES routinely engages with banking specialists, consumer advocates, compliance experts, and other industry participants to ensure that the standards promote a broad and cooperative approach.
The main results anticipated from CFES are:
"Establishing clear compliance guidelines for partnerships between fintech companies and banks is beneficial for the entire sector. Mercury became a founding member of CFES because we think it’s important for the fintech industry to have a cohesive framework that minimizes uncertainty and promotes a consistent and thorough approach to managing risks throughout the ecosystem," said Dan Swislow, Director of Policy & Government Affairs at Mercury.
The coalition aims to establish clear guidelines for compliance and safety to support these partnerships, creating a setting where financial innovation can flourish while still protecting consumers and preserving the stability of the financial system. They will collaborate closely with various stakeholders to make sure these standards are strong and widely accepted.
"CFES will act as an essential link connecting cutting-edge fintech firms, collaborating banks, and financial service regulators," stated Bryan Mulcahey, co-founder of CFES and Managing Partner at FS Vector. "We aim to foster trust, improve transparency, and streamline cooperation between banks and nonbanks, which will help create a more vibrant and secure financial system."
To learn more about CFES and what it does, check out https://fsvector.com/cfes.
