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Bank innovation continues to be a central focus for regulatory agencies. From the launch of innovation offices and office hours to policy statements encouraging innovative approaches, regulators have embraced—and now expect—new forms of responsible innovation. Often, this innovation relies upon strategic bank-technology collaborations.
For that reason, ICBA makes it a priority to engage regulators in our ThinkTECH Accelerator program, hosting a focused “Regulator Day” each year. By bringing regulators to the table to meet with our program’s fintech cohort and discuss regulations, participating companies can refine their offerings to better reflect today’s regulatory considerations.
“The future of financial services really depends on the willingness of regulators to encourage and embrace innovation,” said Federal Reserve Governor Michelle “Miki” Bowman in her opening remarks at this year’s Regulator Day. “Tech accelerators, like the ThinkTECH Accelerator, provide a protected environment for start-ups to create solutions that are specifically designed to assist community banks… Most importantly, it provides a venue for consultation and feedback from regulators.”
This early regulator input is critical to the success of community banks in today’s highly digital environment, where bank and technology partnerships have grown in importance. In fact, newly released consumer data reveals that 78 percent of Americans now prefer to do their banking digitally, pointing to a rising need for the right technology solutions to meet these mounting expectations.
“With the digitization of banking, in order for community banks to be able to grow and thrive, there’s going to have to be some adaptation,” Acting Comptroller of the Currency Michael J. Hsu shared with cohort during this year’s Regulator Day. “In many cases, there’s going to have to be a third-party relationship with companies that can help.”
Bowman also reflected on this digital transformation, noting “Over the past decade or so, we’ve seen and integrated a significant evolution in tech. Clearly, that trend is only accelerating.”
“I can't praise community banks enough for their ability to step up and continue to meet the needs of their customers during these difficult last few years,” she continued. “It's been a real privilege and an honor to work with them from the Federal Reserve’s perspective to ensure that we are responsive to those needs and continue to introduce and publish different guidance and ways to assist community banks in adopting technologies that are helpful for the industry and for customers.”
But even as the pace of change quickens, regulators recognize that innovation is not one-size-fits-all. Depending on the service or solution provided, the amount of risk to the bank and the banking system at large varies greatly. In short, collaborations between banks and technology companies run the gamut in terms of scope and depth of engagement, and that differentiation must be considered at an individual bank level by examiners.
“Bank/fintech partnership. Everyone uses that phrase, but it’s way too wide,” summed up Hsu. “We need to start being a bit more precise about what kind of relationship we’re talking about, and then we can tailor what the rights and the obligations and the risks and the benefits are for each of those.”
“The most important part from our perspective is that a bank is familiar with its third-party partner,” concluded Bowman. “It’s critically important… that the bank is able to choose a partner that they know shares their values and their commitment to their customers and the privacy of their customers.”
And that’s where the ThinkTECH Accelerator steps in. ICBA designed this program to identify community-bank enabled solutions that speak directly to our members’ high-tech, high-touch business models and provide a greater line of sight into the regulatory considerations of ongoing engagement. Having regulator input as part of this program just adds the icing on the cake, helping shape future solutions to respond to today’s ever-changing regulatory environment.
It’s not too late to schedule an Accelerator visit to explore how this cohort addresses your specific business needs. Then join us next month for Demo Day, where this year's cohort will showcase their refined offerings before community bankers, industry experts and policymakers, and share how their solutions support community banks and the customers and communities they serve.