The US Office of the Comptroller of the Currency is contemplating setting up a fintech innovation unit to help regulated financial institutions compete on an equal footing with non-bank providers of financial services.
In a speech before the Federal Home Loan Bank of Chicago earlier this month, OCC chief Thomas Curry noted that new innovations in mobile payments, P2P lending and crowdfunding by non-bank players such as Apple and Google threatened the role of banking intermediaries and represented a real point of departure in the delivery of financial products that required significant scrutiny by regulatory bodies.
Curry went as far as comparing the new wave of ideas from fintech pioneers with the 'innovations' in complex securities products that helped fuel the financial crisis of 2008. "Those very risky activities created huge losses for financial institutions and their customers, and ultimately threatened the entire financial system," he told the audience. "So new products and services have to be evaluated with an eye toward risk management."
Pointing to new approaches that have benefited consumers and helped bring more people into the financial system, Curry noted that a large share of the innovation in financial technology is developing outside of the regulated banking industry.
"There are a number of reasons why that’s so," he said "but the one that’s of most concern to me is the perception that it’s too difficult to get new ideas through the regulatory approval process."
To this end, the OCC has launched a new initiative with a view to building a framework to evaluate fresh thinking in financial services products. The agency has gathered a team of policy experts, examiners and lawyers to examine the issues and report back with recommendations.
"It’s possible we’ll ultimately conclude that we need a small office dedicated to innovation, just as some banks have developed innovation centers," said Curry. "At a minimum, though, we’ll want to be sure that we have the capacity to identify and understand new trends and new technology, as well as the emerging needs of financial services customers so that we will be in a position to quickly evaluate those products that require regulatory approvaland identify any risks associated with them."