On July 23, the OCC, Fed, and FDIC (the banking regulators) released a request for information and comment (RFI) and a joint statement to better understand the relationship between banks and fintechs. The federal banking regulators will seek input on the nature of bank-fintech arrangements, effective risk management practices, and whether there should be enhancements to existing supervision to address these risks in a manner consistent with consumer protection requirements and thwart financial crimes.
The federal banking regulators described bank-fintech relationships regarding depository activities, payment activities, and consumer and small business lending. The regulators also described the risk implications of these relationships, which could lead to possible risks with accountability, end-user confusion, rapid growth, or use and ownership of data and customer information. In the RFI, the banking regulators will be interested in hearing from the public on the descriptions of bank-fintech arrangements and risks summarized in the document.
On bank-fintech arrangements, the RFI posited seven items:
- Do the descriptions of bank-fintech arrangements in this RFI match the types of bank-fintech arrangements in the industry?
- What other benefits are there within bank-fintech arrangements?
- Describe banks’ use of data to monitor risk and ensure compliance with regulatory responsibilities.
- How do the parties to bank-fintech arrangements determine the end-user’s status as a bank customer or the fintech company customer?
- Describe the range of practices regarding using a core bank service provider.
- Describe the range of practices where bank-fintech arrangements involved bank affiliates.
- What are the up-front costs associated with bank-fintech arrangements?
On risk management, the RFI posited 16 items, including practices for maintaining safety and soundness, managing risks related to UDAP or discrimination, required disclosures, connecting to multiple technology platforms, facing a dilemma like a cyber-attack, negotiating contracts, and processing transactions. The banking regulators finally asked for items on trends and financial stability, such as which data would be helpful for the agencies to monitor developments best, supporting increased access to financial products and services, tolerating financial shocks, and supporting responsible innovation. Comments must be received within 60 days of publication in the Federal Register.