The eye-catcher ….
In two weeks, state utility regulators will convene in San Antonio, Texas for the National Association of Regulatory Utility Commissioners annual meeting to discuss how they can leverage a recent decision by the United States Court of Appeals-DC Circuit that the Federal Communications Commission cannot preempt state regulation of concerns over consumer access to and privacy on the internet via broadband.
Some states such as California have moved ahead with their own net neutrality laws, hoping to enforce consumer protections by prohibiting internet access providers from lowering traffic speed from certain websites or preventing internet service providers from favoring their own content by blocking a consumer’s access to content that the consumer prefers.
The state-by-state approach problem
The problem with a state-by-state approach for a financial technology firm is the uncertainty that data and capital face when they traverse state borders. Will a content delivery firm tasked with storing and transmitting financial data on behalf of a financial technology firm have to enter into different interconnection agreements per state because of the differing consumer privacy laws encountered in each state? Will differing requirements on paid prioritization result in financial data traffic slowing down depending on which state border it crosses?
There is an irony that on a global basis, the United States is a staunch proponent of freer cross-border data flows, but would run the risk of subjecting those same data flows to a hodge-podge of regulations that create digital toll roads for financial data traffic.
The changing consumer taste in banking
What federal and state policy makers should be focusing on is ensuring the amount of bandwidth necessary for digital transmission of financial data and capital is available. Our use of digital banking services will not be shrinking anytime soon. MediaCom Business cited data in a blog post that 92% of millennials make their choices as to where to bank based on the digital services a bank offers. Legacy banks hoping to compete with digital upstarts are accepting this type of demand an, as found by consulting firm Accenture, are exploring how best to integrate and deploy technology necessary for meeting this demand.
Recommendation: Seamless versus Balkanization
The supply of digital banking and payment systems services combined with increasing demand for these services means more bandwidth is needed in order to optimize the consumer experience. State and federal policy makers can facilitate this need for increased bandwidth by focusing policy on ensuring the delivery of this infrastructure. Coming up with 50 different rules on net neutrality is more distraction than help.
What should be spawned in next month’s NARUC meeting is a recommendation for national legislation on consumer privacy. Consumer privacy concerns should no longer be leveraged to create 50-plus fiefdoms for net neutrality. Transmission of information, data, and knowledge should be a seamless experience for consumer and firms that use financial technology to transmit value and capital.