The federal banking agency that supervises national banks and federal savings associations – the Office of the Comptroller of the Currency (“OCC”) – has formally taken up financial technology (“FinTech”) as an important regulatory issue. In a white paper released on March 30th, the OCC outlines principles that the OCC will follow in its approach to regulating FinTech. The white paper reflects the OCC’s desire to work with banks and FinTech firms to foster the responsible development of FinTech innovations. The white paper seeks public comment on issues raised in the paper by May 31st.
In the white paper and in public remarks made by Comptroller Thomas Curry since its release, the OCC clearly recognizes that FinTech is delivering benefits to consumers and businesses, that banks must adapt to changes brought by FinTech in order to remain relevant, and that regulators must be open to such changes and develop a regulatory structure that supports FinTech innovations in a responsible way. The white paper is likely to influence the work done in this area by the other federal bank regulators, namely the Federal Deposit Insurance Corporation and the Federal Reserve Board. The white paper is significant for marketplace lenders in addition to banks, since the regulation that flows from the paper will affect those lenders doing business with national banks.
The white paper sets forth eight principles that will guide the OCC for its framework of understanding and evaluating innovative products, services, and processes that OCC-regulated banks may offer or perform:
- 1. Support responsible innovation. This involves the OCC improving its understanding of FinTech and developing an easy process for banks and other stakeholders to seek guidance from the OCC.
- 2. Foster an internal culture receptive to responsible innovation. The OCC seeks to use existing internal groups to help bridge the knowledge and expertise gap and develop or augment training programs to make the OCC more receptive in this area.
- 3. Leverage agency experience and expertise. The OCC plans to designate lead experts in FinTech innovations in its office.
- 4. Encourage responsible innovation that provides fair access to financial services and fair treatment of consumers. The OCC will encourage FinTech innovations that facilitate financial products and services to low-to moderate income populations and the unbanked and underbanked.
- 5. Further safe and sound operations through effective risk management. The OCC emphasizes that banks must apply existing corporate governance and risk management principles to FinTech.
- 6. Encourage banks of all sizes to integrate responsible innovation into their strategic planning. The OCC states that every bank should address FinTech in its strategic planning and that any use of FinTech by a bank should align with customer needs and the bank’s overall business plan and risk management practices.
- 7. Promote ongoing dialogue through formal outreach. The OCC has scheduled a forum on June 23rd in Washington for banks and other stakeholders in the FinTech space, and plans to have other workshops and meetings to promote discussion in this area.
- 8. Collaborate with other regulators. The white paper can be seen as a starting point for the collaborative work of all of the federal banking agencies.
Banks, FinTech companies, and marketplace and alternative lenders should provide written comments to the OCC in connection with the white paper. Stakeholders have the opportunity to shape the OCC’s thinking on FinTech and the role of banks in delivering services to consumers and businesses using FinTech innovations. The OCC is clearly taking the lead among the federal banking agencies in responding to Fintech; it deserves credit for doing so.