More Fintech Guidance from Fed as Regulators Scrutinize Partnerships
Community bank-focused document is designed to guide companies through the innovation process
- |
- Written by Banking Exchange staff
The Federal Reserve has issued guidance for the increasing number of community banks partnering with financial technology companies.
The paper – Community Bank Access to Innovation Through Partnerships – highlights the risks and opportunities involved in establishing formal relationships with fintechs and is intended to help guide banks to plan for innovative uses of new technology.
Fed governor Michelle Bowman, who holds the central bank board’s community bank seat, said a recent event hosted by the American Bankers Association (ABA) that banks needed to be focused on “establishing trust” and “building a long-term culture committed to innovation”.
The Fed and other regulators have undertaken several initiatives in recent weeks to give guidance to community banks around innovation and fintech partnerships.
Last month it published a due diligence guide in collaboration with the Federal Deposit Insurance Corporation and the Office for the Comptroller of the Currency. It has also issued requests for information relating to risk management and use of artificial intelligence technologies.
Bowman said bankers should engage with the central bank regarding innovation. She highlighted a forthcoming “Ask the Fed” program dedicated to community banks and services providers.
US Bank and Congressional Bank announced partnerships last month, while New Jersey-based Cross River Bank launched a venture capital arm in June to invest in companies in the lending, payments, investment, and fintech sectors.
Cross River is one of many community banks that struck up partnerships with fintechs during the pandemic in order to facilitate the distribution of Paycheck Protection Program loans.
In May, Customers Bank announced a partnership with blockchain company Tassat to implement a blockchain-based, business-to-business payments network for its corporate clients.
Meanwhile, Community 1st Credit Union adopted an artificial intelligence-based platform to power its credit decisioning and underwriting capabilities. The technology is provided by Scienaptic, a specialist in underwriting technologies.
Tagged under Community Banking, Feature3, Feature, M&A, Management,
