ICBA Policy Resolution: Innovation

Position

  • ICBA supports and encourages community banks to innovate, both organically and through partnerships with other innovators.
  • ICBA supports a legal and regulatory framework, coupled with a supervisory process, that fosters innovative financial services.
  • ICBA urges regulators and other policymakers to ensure that non-banks which offer financial services directly to customers adhere to the same regulatory requirements, oversight and privacy preferences as banks.
  • ICBA supports industry and regulatory efforts to streamline and harmonize the existing obligations to conduct initial due diligence of fintechs. 
  • ICBA encourages regulatory agencies to publish general and anonymized information following the examination of third parties to ease community banks’ disproportionate burden of vetting potential fintechs.
  • ICBA supports initiatives to enhance banking and payments technology and standards infrastructure. This infrastructure must be available to all federally insured financial institutions, regardless of size, to ensure competitive parity.
  • ICBA urges core processors and other technology partners to help community banks maintain their market position and achieve ongoing efficiency by:
    • meeting and exceeding evolving customer expectations for banking and payments products and services in a timely manner; and
    • ooffering innovative products based on modern technology.

Background

Innovation and Risk. Technological innovation and deployment, particularly digital innovation, continue to alter the way that consumers and businesses conduct banking and commerce and influence the products that community banks offer. Additionally, technology deployment may alter the risk profile of community banks and subject them to a myriad of regulatory requirements and oversight.

The banking agencies play a valuable role in defining and identifying the risks of existing and emerging technologies for both community banks and their service providers. However, guidance should be crafted in a manner that does not hamper innovation or impose undue burden.

Fintech. Financial technology (known as fintech) companies offer new channels to financial products and services for consumers and small business. Fintech companies can serve as valued partners to community banks; however, they also may disintermediate community banks when they provide financial services directly to customers.

Federal and state regulatory frameworks for licensing and regulation of fintech products and services should include consumer and data-security protections consistent with those that apply to the banking industry. Theses frameworks should also maintain harmonized due diligence requirements to reduce burdens for both the bank and fintech.

Core Processing Technology. Core processing companies should act as a strategic partner to ensure support of a community bank’s long-term technology and business objectives. (See Core Processing Technology resolution on page 55.)

Staff Contacts: Michael Emancipator and Deborah Matthews Phillips