US lawmakers on Wednesday convened a House Financial Services Committee hearing in Washington to examine whether Congress should establish a dedicated federal payments charter for financial technology companies — a move that industry leaders say is long overdue, but which bank representatives and consumer advocates warn could destabilise the financial system.

The Case for a Federal Payments Charter

David Portilla, a partner at Davis Polk, told the committee that the US regulatory architecture remains anchored to a traditional banking model that bundles deposits, lending, and payments — even as those functions have increasingly separated in practice.

'A defining feature of our market today is that these once bundled features have, to a considerable degree, been unbundled,' Portilla said. He argued that specialised payment firms now operate in a regulatory vacuum, noting there is 'no general federal payments legislation and no federal payments licence,' forcing companies to navigate a fragmented patchwork of state-level regimes. 'The remedy should not be to force new business models into ill-fitting categories,' he added. 'Innovation is often best favoured by updated and clear legal standards that match today's markets.'

Eileen O'Mara, Vice Chair at Stripe, reinforced that position, describing the current framework as one that defines companies by what they are not rather than what they do. 'The current framework is defined as you're a banker, you're not a bank,' she said. O'Mara stressed that Stripe does not lend or invest customer funds, and argued that the risks payment firms manage 'require a different kind of regulation.' A dedicated federal charter, she contended, would deliver 'lower costs, faster settlement, and a more resilient system built for how businesses actually operate today.'

Lawmakers' Concerns Over Global Competitiveness

Several members of the committee expressed concern that the United States risks falling behind other advanced economies on payments innovation if it fails to modernise its regulatory framework. Supporters of the proposal highlighted the burden placed on businesses that must secure multiple state licences and banking partnerships before gaining access to the Federal Reserve's payment infrastructure. A federal charter, they argued, could streamline oversight while tailoring regulation specifically to payment companies rather than treating them as conventional banks.

Banks and Consumer Groups Urge Caution

Paige Paradon of the Bank Policy Institute cautioned that companies seeking new charters should not receive 'the implicit imprimatur of federal oversight without accepting the full scope of those obligations.' She warned that granting non-bank firms broader access to Federal Reserve payment services could draw deposits away from insured banks into uninsured institutions, creating systemic risk. 'That is not a formula for innovation,' Paradon said. 'It is a formula for regulatory arbitrage and for the gradual erosion of the safety and soundness standards that protect the American public.'

Tara Flynn of the National Community Reinvestment Coalition argued that any non-bank entity receiving access to banking and payments infrastructure must face robust consumer protection rules, community investment obligations, and rigorous supervision. 'When a non-bank receives access to the banking and payments infrastructure, it should come with responsibilities,' Flynn said.

What Happens Next

The hearing marks an early but significant step in what could become a major legislative effort to reshape how fintech payment companies are regulated in the US. No draft bill has been introduced yet, and the debate reflects deep divisions between the financial technology sector, traditional banks, and consumer advocates. The outcome will have implications not only for US-based payment firms but also for international competitors and emerging markets — including India — that rely on cross-border payment corridors.