US payments and lobby group The Clearing House has called for legislative measures to rein in non-bank startups hitching a free ride on banking rails.
Owned by 24 of the nation's largest banks, The Clearing House has published a white paper to highlight perceived regulatory gaps relating to the data security practices of innovative startups such as Square, Venmo and Stripe and bigger tech groups such as Apple and Google.
Describing such companies as 'naive' interlopers with a disregard for watertight security measures, the paper states: "Banks are subject to extensive regulatory, supervisory, and enforcement scrutiny by their regulators with respect to privacy and data security, APPs (alternative payment providers), by contrast, are providing their products and services by continuing to rely on the backbone of existing bank payment systems while capitalising on innovations in communications platforms, thus generally managing to avoid the reach of the traditional financial regulators."
The Clearing House complains that APPs only face punishment for lax data security practices if they suffer an actual cybersecurity breach that is discovered by the government, because, unlike banks, such companies are not subject to regular examinations and enforcement actions by regulators.
The paper calls for increased scrutiny of new entrants by "using available examination authority and enforcing existing requirements as well as enacting legislation establishing additional data security requirements for APPs".
Read the full paper:» Download the document now 622.6 kb (PDF File)