Fintech Inevitable, But Petrou Says Risks Abound

At the end of last week, two large regional banks, BB&T and SunTrust announced that they are merging. The entity will be the sixth largest U.S. bank and the largest bank merger since the 2008 financial crisis. A MarketWatch story yesterday indicated that large bank mergers are part of a somewhat recent trend, citing the mergers of Chemical Bank with TCF Bank, and Key Bank with First Niagara, both in 2016. (The number of bank acquisitions have been static in 2017 and 2018, with 252 and 253 banks, respectively, according to American Banker.)

If large bank mergers are a trend, Managing Director of Federal Financial Analytics Karen Petrou told MarketWatch that this is in part because banks realize that they can combine resources to develop mobile banking capabilities to compete with online banks.

“If banks don’t come up with ways to innovate, they die,” Petrou told MarketWatch yesterday. “Then consumers are left to do their banking with nonbanks.”

Federal Financial Analytics, where Petrou is the managing director, is a Washington, D.C.-based consulting firm and Petrou is a highly regarded voice in the financial regulation space.

While Petrou acknowledges that online banking is the only alternative if traditional banks don’t innovate, she sees serious problems in fintech which she outlined in a paper published earlier this month, according to American Banker.

For instance, she wrote about the danger of a company like Amazon getting into banking and being able to charge individuals different amounts for the same item based on its knowledge of how much money the customer has. Or, the implementation of better banking policies for people who exercise and eat healthier. Petrou says this favors wealthier people with more time for exercise and greater access to more expensive, healthier food.

“I am all for technology,” Petrou said. “But I spent a lot of time when I was a student at MIT studying tech policy, and there is one after another example of seemingly promising technologies with terrible, unintended consequences.”

Todd Stone was a reporter for deBanked.