Adapting the regulatory landscape for FinTech remains a challenge

FinTech firms—a business category that typically applies to lending and other money services that are offered online and are either independent of banks, or work with traditional financial institutions behind the scenes—have become an increasingly prominent fixture in the financial services sector, despite having to deal with a hodgepodge of state-vs.-federal regulations.

FinTech lenders’ use of innovative underwriting metrics may allow them to offer some borrowers better prices than they are able to obtain from more traditional lenders, is one argument. FinTech can allow smaller banks the ability to lower overhead costs and diversify their loan portfolio with loans outside their traditional service area. Smaller loans can be offered, quickly and efficiently, to consumers and businesses that need them.

On paper, regulators seem to acknowledge their role in fostering, not inhibiting, FinTech innovations. The Office of the Comptroller of the Currency has established an...