It is unclear whether nonbank financial technology firms have fully captured the risks of economic downturns and cybersecurity breaches into their business model, Federal Reserve Bank of Boston President Eric Rosengren said in a speech today. He further noted that — while constantly evolving cyber threats require constant awareness — financial “institutions of all sizes have been expending significant resources very strategically in this area, and bank supervisory examiners have been verifying that controls are in place.”
“To the extent that so-called ‘fintech’ entities compete directly with banks with similar products, they are not burdened by large brick and mortar operations or the regulatory oversight that comes with being a bank,” Rosengren said. “It is important to examine whether these new innovators have fully captured the risks of economic downturns and the implications for their lending model.”
Meanwhile, he added, “a proliferation of apps increasingly focused on customer convenience may not always focus as intensely on security.” As fintech companies and banks alike seek to meet customer demands for financial convenience, he urged all parties to focus on protecting the financial system from cyber intrusions, particularly those that exploit customers and their devices as entry points.