Regulators Discuss the Future of Community Bank Innovation at Fintech Symposium

Community banks’ focus on next-generation digital solutions was on full display during a recent symposium hosted by the Federal Reserve Bank (FRB) of Philadelphia and the Conference of State Bank Supervisors (CSBS). It was such a fantastic event that I wanted to take a moment and recap it for our members and followers.  

The wide-reaching impact of community banks was a key point in the opening remarks of Patrick T. Harker, president and CEO of FRB Philadelphia.  

“I think it sometimes gets lost how central community banks are to our economy, and indeed, to American society,” he noted. “The economic shutdowns imposed to curtail the spread of COVID-19, particularly those that shuttered bank branches, have also demonstrated how important digitization is and the peril of falling behind on fintech.” 

While I see the value of community banks every day it was great to hear yet another regulator acknowledge the critical role of our industry and continued need for digitization in banking.  

Supporting Community Bank Innovation 

This continued drive for innovation served as the rationale for the Fed and CSBS to convene industry regulators, community bankers, and fintechs to showcase and encourage industry advancements and will undoubtedly continue during the fifth annual Fintech Conference at the Federal Reserve Bank of Philadelphia, Nov. 16-17. 

“We are committed to making sure there aren’t roadblocks in people just getting their work done,” said Sultan Meghji, chief innovation officer at the FDIC. “I hate seeing an expert in the field, spending 45 minutes of every hour fighting a process, fighting a piece of old technology…. That gets in the way of us building a better system that is there for the future.” 

That theme of building for the future permeated the sessions, and regulators recognized that community bank/fintech partnerships are key to that development. They pointed to a number of their own innovation efforts to support these relationships, including: 

  • OCC Innovation Pilot Program, which allows for supervised banking institutions to reach out and have the OCC review products, initiatives or fintech innovations and provide feedback outside of the examination process. 

  • FDIC Rapid Phased Prototyping Program, which allows companies to engage with the FDIC to quickly deliver cutting-edge technologies to banks. 

  • A Fintech Due Diligence Guide, a collaborative initiative between the Fed, the OCC, and the FDIC, that will include a range of questions that banks can pose as they conduct due diligence on prospective fintech partners, key considerations when evaluating responses, and examples of documents to collect in support of due diligence.  

  • A new public paper, to be published by the Fed, based on the results of outreach to understand the range of fintech partnerships, benefits and risks, and challenges small banks may encounter.  

The Future of Community Bank Innovation 

As a participant in this forum, I shed light on many of the innovations currently taking place within community banking, thanks, in part, to our ICBA ThinkTECH Accelerator Program participants. Specifically, symposium participants heard from 11 fintechs from our previous cohorts about top-of-mind community bank innovations. The rate at which these targeted solutions were brought to market was not lost on those in attendance.  

“Community banks have the unique advantage of knowing the needs of their communities, of being agile and responding to changing market conditions,” said Kavita Jain, deputy associate director of the Office of Innovation Policy, Board of Governors of the Federal Reserve System.  

Indeed, community banks’ nimbleness and commitment to innovation has never been stronger.  Now it’s time to take the lead in addressing customer needs through technological partnerships that support your customers and taking community banking to the next level. 

Charles E. Potts is ICBA senior vice president and chief innovation officer.

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