FDIC floats certification program for fintechs working with banks
The Federal Deposit Insurance Corp. is seeking comment about a potential set of standards and a certification program intended to make it easier and less costly for financial institutions to partner with technology firms, the agency said Monday.
The request for information will address several matters. For instance, it seeks comment on the idea of the FDIC partnering with a standards-setting organization that would develop best practices for technology firms that want to work with banks. The standards-setter would focus on areas such as credit underwriting models.
The FDIC is also exploring the possibility of a voluntary certification program that would assess a technology company’s compliance with the standards.
“Fostering innovation in the financial sector is a top priority for the FDIC,” Chairman Jelena McWilliams said in a press release. “We have to remove unnecessary regulatory impediments that banks must overcome when developing or deploying new technologies.”
The agency expects the program will be particularly beneficial to community banks that may not have the budgets to invest in their own technology, or lack sufficient staffing or the technical expertise to properly assess new products.
“The cost to innovate is in many cases prohibitively high for community banks,” McWilliams said in October during a speech at the Federal Reserve Bank of St. Louis. “They often lack the expertise, the information technology, and research and development budgets to independently develop and deploy their own technology. That is why partnering with a fintech that has already developed, tested, and rolled out new technology is often a critical mechanism for a community.”
The FDIC's program could also benefit fintechs seeking partnerships with community banks. A tech company could potentially apply for one certification that would be accepted by many institutions rather than spending time and resources on a patchwork of different requirements.
The request for information is part of the FDiTech initiative, which aims to promote the use of new technologies across the financial services sector. The public will have 60 days to provide comments.