Tech companies haven't been shy about pushing into heavily regulated industries such as healthcare. But while finance also represents a new frontier of possibilities for the deployment of technology, a dense regulatory landscape may ultimately dictate that progress be slow and steady.

Whether it is Facebook exploring digital currencies or Google planning to introduce consumer bank accounts, a recent article by CNBC pointed out that many tech entities are steering clear of crossing the line into regulated financial institution territory. Still, even those lines can be difficult to navigate, while the possibility of new regulations that deal specifically with fintech may become gridlocked in a battle waged between state and federal regulators.

"I think that financial regulators are trying to be accommodating, but I don't know how successful that's been," said Jeff Hare, co-chair of DLA Piper's financial, regulatory and technology team. 

Much of that difficulty may be inherent to banking's long history. Per Hare, banking is unlike other industries in that it has been steadfastly traditional and antiquated in the delivery of its services, which technology by its very nature would disrupt or upend. It's an oil and water situation, a clash of old and new.

For example, tech companies looking to become a money transmitter—a business that provides payment instruments or money transfer services—may have to contend with independent licensing processes in place across 49 states (absent Montana). The alternative is the risky proposition of bringing a technology product operating under geographic restrictions to a national audience.

"That's the message out there, that it's a million dollar investment to get licensed and it's a six to nine-month process. That's hard when folks are anxious to get to market and folks are anxious to use their resources in developing the product, not on getting licenses. So there's definitely an impediment to technology," Hare said.

Tech companies serious about taking the leap into financial services have other options—they just may not be very palatable from a business perspective. Obtaining a federal or state banking charter would free tech companies from certain hurdles—such as having to worry about money transmitter licenses in individual states, for example—but with that trade-off comes ownership restrictions, plus the need for experienced bank employees.

Some tech companies opt to partner with a bank instead, an arrangement that still has to be carefully structured and might cut back on profits. However, with more tech companies pushing into the finance space, could existing regulations see updates or additions? Philip Feigen, an office managing partner of Polsinelli, thinks regulators don't want to stifle the growth of innovative technologies.

"I think the states are very interested in people doing business in their states. They are more apt to try and figure out ways to work with businesses," Feigen said.

But as with regulating other technologies, challenges continue to persist. Feigen pointed out that imposing legal definitions on technology can be difficult, since there's always something that either falls outside the established parameters or quickly evolves beyond what has already been legally established.

Still, regulators have already made attempts to streamline the licensing obstacles confronting fintech companies, but tensions between state and federal authorities have resulted in a stalemate.

Case in point, the Office of the Comptroller of the Currency (OCC) came forward with a national fintech charter in July 2018, but that was quickly met with the threat of multiple lawsuits before eventually being struck down in a October 2019 decision by a judge in U.S. District Court for the Southern District of New York.  Still, the story may not be over—the OCC filed an appeal this past December.

"[States] are not comfortable with the OCC getting the authority to regulate things that they typically regulate themselves," Hare said.