Morningstar - Q2 2023 - 80

Ten Questions
Attorney Eyvonne Mallett on the future
of financial services.
Laura Lallos, managing editor of Morningstar
magazine, interviewed Mallett in March. The
transcript has been edited for length and clarity.
1. What is open banking?
Open banking refers to a consumer's ability
to control their financial data by allowing
financial-service providers to access it in real time.
The 2010 Dodd-Frank Wall Street Reform and
Consumer Protection Act authorizes the Consumer
Financial Protection Bureau to help ensure
that consumers can leverage their data to improve
consumer choice and expand financial inclusion.
2. Why has the CFPB Open Banking Rule taken so long
to implement?
The CFPB must strike a balance between protecting
privacy and security, allowing consumers
control over their data, and advancing competition.
The European Union addressed these issues
by standardizing the technology used to share
data, providing clear guidelines, and enacting
uniform regulations. A review of the EU's process
may be instructive for the CFPB.
Eyvonne Mallett is an attorney at Loeb & Loeb
LLP in Washington, D.C. She works on
a broad range of privacy, cybersecurity, and
contractual matters, with a focus on
financial-tech and financial-services regulation
and compliance. Her practice also includes
managing deals involving cryptocurrency
and other digital assets, blockchain, payment
technologies, security and utility tokens,
nonfungible tokens, stablecoins and their
ecosystems, and the metaverse. She has a J.D.
from University of Maryland Francis King
Carey School of Law, MSM and MBA
from University of Maryland, and a B.S. from
Towson University.
Photography by Matt Roth.
3. Morningstar has advocated for financial advisors to be
authorized agents of investors. What are your thoughts?
Authorization to aggregate financial data on behalf
of an investor may allow financial advisors
to best advise their clients. The CFPB's approach
would balance the importance of the investor's
privacy and right to control their data.
4. How are new technologies being used
in financial services?
Artificial intelligence finds irregularities in patterns
that would go unnoticed by humans. One of the
most significant business cases is to prevent fraud
and cyberattacks. Firms are developing virtual
reality trading workstations to improve accessibility
to trading algorithms. Augmented reality is
being used in financial products. A major credit
card retailer, for example, has collaborated
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Morningstar Q2 2023
with AR to build a universe in which users may pay
without leaving the virtual environment.
5. What's on the horizon?
There are profits to be made by moving money
between the digital and physical worlds.
Metaverse platforms allow users to buy virtual
goods-sneakers from Nike, clothes from
Gucci-to decorate their avatars, usually with
digital assets. Transferring that into the real world
involves exchanging it for real currencies.
6. What are the challenges of regulating digital assets?
Applying existing frameworks or developing new
ones for cryptocurrency and nonfungible tokens is
challenging for several reasons: (1) the crypto
and NFT worlds evolve rapidly; (2) data is patchy as
there are no universal reporting requirements,
and (3) it is difficult to monitor thousands of actors.
7. What new regulations might we expect?
Several bills have been introduced in Congress
that focus on the jurisdiction of the SEC and the
Commodity Futures Trading Commission and offer
greater protections for customers. The Digital
Asset Anti-Money Laundering Act would prohibit
financial institutions from transacting with digital
assets mixers that obscure the origin of funds.
8. Any recommended reading on these topics?
Brett King's Bank 4.0: Banking Everywhere, Never
at a Bank explains how tech like AI, blockchain,
and Big Data are affecting mainstream finance.
9. How about a personal pick?
The Light We Carry. Former first lady Michelle
Obama shares practical wisdom and
powerful strategies for staying hopeful and
balanced in today's highly uncertain world.
10. What is the best advice you've received?
Hard work beats talent, and consistency is the
key to success.
https://www.morningstar.com/authors/44/laura-lallos
Morningstar - Q2 2023

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