The establishment of a public/private standards-setting organization to help banks adopt third-party financial technology solutions is an idea that deserves further consideration, FDIC Vice Chairman Travis Hill said today. During a speech about technological innovation in banking, Hill noted that the FDIC released a request for information on the development of such an SSO in 2020. The agency has since made little progress on the proposal, but Hill said it was worth revisiting.
“Working with the private sector and the federal banking agencies, the SSO would develop standards for due diligence and emerging technologies,” Hill said. “This would enable banks to onboard fintechs and technologies that had received a ‘seal of approval,’ reducing the need for each bank to conduct costly, time-consuming due diligence of its own. Banks would still be responsible for managing risks associated with third parties, including those related to consumer protection, just as they are today.”
Hill also said that community banks face hurdles in adopting new technologies, from a lack of budgetary resources to regulators sometimes standing in the way. “Regulators need to engage with banks, with technology firms, with private sector experts and with consumers to better understand how technology is changing the industry and how to foster a regulatory environment that is conducive to innovation,” Hill said. “This requires working to identify and remove impediments to technology adoption, and reducing regulatory uncertainty.”
