Modeling Payments Regulation and Financial Change

The dominant narrative about financial technology holds that change in the financial services industry demands a broad rethinking of regulatory approaches. But the regulation of payment services defies this narrative. Its technology and business-model neutrality makes it relatively well-suited to adapt to financial change. This Article builds a “payment stack model” to place industry incumbents, new entrants, and regulatory objectives together in context. The model shows that activities making up the payments ecosystem sort into technology and business-model neutral categories, each subject to roughly equivalent regulation, in service of roughly equivalent objectives. That neutrality makes existing payments regulation more durable in the face of financial change than the dominant narrative would predict. Rather than engaging in a broad rethinking of payments regulation, then, regulators have the opportunity to focus on nuanced, fact-specific strategies. This Article sets out several of those strategies, which range from simply clarifying that existing rules apply to changes in technologies or business models, to more significant retooling in certain cases to guard against regulatory obsolescence