How will new regulation impact US payments innovation?

Finextra

08-05-2025

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This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.
This is an excerpt from The Future of US Digital Payments 2025: ACH & Beyond.
While rules and regulations are the bedrock of financial services and payments, organisations across the US digital payments landscape must prioritise innovation, transaction quality, opportunity and financial reward at the same time as compliance in order to remain relevant and competitive.
In November 2024, the Consumer Financial Protection Bureau (CFPB) finalised a rule to supervise the largest nonbank companies that offer digital funds transfer and payment wallet applications.
At the time, the intention was to ensure companies handling over 50 million transactions every year follow federal law in the same way that large banks, credit unions, and other financial institutions that are already supervised by the CFPB are.
Then CFPB director Rohit Chopra said: 'Digital payments have gone from novelty to necessity and our oversight must reflect this reality. The rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures.'
A future of deregulation could be riskier than is currently known
Levelling the playing field in this way has long been perceived as beneficial for both technology firms, financial institutions and most importantly, their customers.
As the CFPB says: 'Supervision can prevent harm by detecting problems early. Supervision also is an important tool for the CFPB to assess risks that can emerge rapidly in this market, including from outages and other issues that could lead to millions of consumers losing access to their funds.'
However, in March 2025, the House of Representatives passed a Congressional Review Act resolution overturning the CFPB rule after the organisation itself was also called into question shortly after President Trump returned to office.
In the Financial Technology Association's (FTA) view, the rule 'was overreaching and duplicative as payment companies are already regulated at the state and federal levels. As the Senate has already passed the resolution, S.J. Res 28 now heads to the President's desk for his signature.'
The rhetoric of deregulation that continues to infiltrate conversations about financial services may have more risks than is currently understood.
Florence School of Banking and Finance and professor of financial stability, Thorsten Beck and financial economist at Bayes Business School at City St George's, University of London, Vasso Ioannidou, explored this in a Politico article.
'During his first term in the White House, US President Donald Trump rolled back key safeguards on regional banks. The result? A wave of high-profile failures in 2023 – most notably Silicon Valley Bank. Now, in his second term, Trump is going even further, not only gutting regulations but moving to place independent financial watchdogs under direct White House control.'
Regulation shifting from serving the public could threaten financial safeguards. Without oversight, 'others may feel forced to follow, unwilling to leave their banks at a disadvantage. The outcome? A weakened global financial system, more vulnerable to bubbles, crises and costly government bailouts.'
Striking the balance between private and public sectors will be necessary for US payments
Balancing innovation and regulation in the US payments sector is not a new challenge, and with the accelerated development of the fintech evolution, a balance must be found between what works with both the public and private sectors.
For the success of the future of digital payments in the US amid potential incoming deregulation, rigid checklists may not be the way forward.
Regulators could focus on outcomes and risk-based approaches, allowing financial institutions to innovate while still aligning with consumer protection, privacy and financial stability.
In addition to this, regulatory sandboxes have proven to work in other countries and in states like Arizona and Utah; a national sandbox with federal coordination across agencies such as the CFPB, OCC, Federal Reserve and the SEC could be the solution that US payments requires.
It is evident that change needs to occur, but the capacity in which it should, is what still needs to be considered.
What does the industry think of the future of regulation?
Alongside this, updating regulation has been long called for, particularly because more were written before real-time payments, APIs or stablecoins, for that matter.
Modern risks and technologies must be considered by regulators, and this is where the US is not unique in their falling behind.
Technology can also be leveraged to automate compliance, so that payments firms can stay innovative and compliant, while also cutting down friction and cost when partnering with RegTech companies.
For the US payments industry in 2025 and beyond, innovation can and must be prioritised.
In conversation with Finextra, Renata Caine, general manager and senior vice president, embedded finance, Green Dot, made clear that 'firms should look to our regulators and the rules and regulations they implement as guardrails and guidelines that ensure our innovations are working for the customer, not against them.'
When speaking to Finextra, Taira Hall, Citizens' head of payments echoed Caine's sentiment and said that the 'payments landscape is a complex ecosystem that requires organisations to be proactive in their strategy, especially as it relates to risk and compliance, in order to drive tangible success.'
They went on to say that regulatory requirements should be reviewed at the start of every innovation cycle. 'By integrating these requirements from the start, and leveraging the necessary teams through the product lifecycle, organisations have the ability to limit risk and other roadblocks.'