Fintech is at the forefront of the financial industry. A recent announcement by the Office of the Comptroller of the Currency (OCC) shows that this trend will only continue to grow and cements fintech as an important piece to the financial services puzzle in the future.
On Oct. 26, the OCC announced it is creating a new stand-alone office to help banks and other entities develop fintech products. The office will be called the Office of Innovation and is slated to open in the first quarter of 2017 with locations in New York, Washington, D.C., and San Francisco.
The Office of Innovation is modeled after the Consumer Financial Protection Bureau’s Project Catalyst, which was also designed to help develop fintech that complies with consumer protection laws. According to the press release, the new office will be “dedicated to responsible innovation” and will enable the OCC to better understand and respond to the growing number of fintech-related changes impacting banks.
Through the new office, the OCC hopes to foster informal discussions between the regulators and the banks and push the development of fintech products that both improve customer service and comply with existing laws. These informal discussions will give the OCC an opportunity to understand what new products do, how they implicate the safety and soundness of banks, and how they interact with existing regulations. On the other side, collaborating with the OCC before the products launch will help developers learn the regulatory framework in which their products will enter.
The establishment of the OIC is the latest development by the OCC to ensure that new fintech products promote the safety of the banking system, responsibly extend credit, and help increase access to banks to those currently left out of the system. The idea for the OIC was first discussed in a white paper released in March of this year by the OCC, but the recent announcement will soon make it a reality.
The announcement has been met with mixed responses. During the comment period of the March white paper, some commenters saw the OIC as another regulatory hurdle they must jump through. However, the OCC reported that commenters generally supported the creation of a stand-alone office to foster fintech innovation. “The OCC’s efforts to test innovative financial products in a controlled environment are a step in the right direction,” said Rob Nichols, president and CEO of the American Bankers Association. “Ultimately, banks should be able to pursue innovative initiatives to service their customers in an environment that provides regulatory flexibility and clarity.” The creation of the OIC firmly cements fintech as an integral part of the financial services industry and will hopefully lead to innovation in the field and help the banking system as a whole.
As it is implemented, we will continue to monitor the OIC and other fintech developments.