Facilitating Fintech’s Future: How Congress and Regulation can Support Innovation in Fintech, Earned Wage Access and Buy Now, Pay Later Products
- Author(s):
- Todd J. Zywicki
- Posted:
- 01-2026
- Law & Economics #:
- 26-01
- Availability:
- Full text (most recent) on SSRN
ABSTRACT:
Technological innovation has long been a central driver of competition, consumer choice, and financial inclusion in U.S. consumer financial services. From the advent of standardized credit reporting and automated underwriting to online banking and digital payments, innovation has repeatedly expanded access while reducing costs and discriminatory practices. Today, fintech represents the latest and most consequential wave of this evolution. While some innovations, such as artificial intelligence and alternative data underwriting, are genuinely novel, others, including Earned Wage Access (EWA) and Buy Now, Pay Later (BNPL), are modernized versions of well-established financial practices delivered more efficiently through technology.
This article argues that fintech’s benefits accrue most strongly to consumers historically underserved by the traditional financial system, including younger, lower-income, rural, and minority households. Drawing on a broad range of empirical research, it shows that fintech products increase access to credit, reduce reliance on high-cost alternatives, lower transaction costs, and mitigate demographic disparities in pricing and approval rates. Evidence indicates that EWA helps workers smooth income volatility, avoid overdraft fees and payday loans, and improve job retention. BNPL enables consumers to manage liquidity and spread the cost of purchases, usually with no interest, without increasing overall financial distress. Moreover, while critics have expressed concern that both EWA and BNPL could lead to increased financial distress, empirical evidence to date indicates that these speculative concerns are unfounded.
Despite these benefits, fintech innovation faces growing regulatory risks. The article contends that inconsistent and overly burdensome state regulation, arbitrary asset thresholds, and misguided restrictions threaten competition and consumer welfare by raising costs and limiting choice. It concludes that a coherent national regulatory framework—emphasizing competition, proportional oversight, and evidence-based intervention—is essential to preserve fintech’s promise. Properly designed regulation can protect consumers while allowing innovation to flourish, particularly for those with the fewest existing financial options.