28 May 2017
Find out more

US regulator cites fintech as risk to banking system

06 January 2017  |  26789 views  |  1 Wall street sign

Emerging financial technology poses a threat to US banks that are unable to compete with this developing field, according to an official report from the US Office of the Comptroller of the Currency (OCC).

 The OCC has released a semi-annual report into risks to the banking system since 2012 and in its latest report, fintech is ranked alongside bank account scandals such as the one involving Wells Fargo and Brexit as the biggest risks for US banks and their operations.

“Strategic planning remains important as banks adopt innovative products, services, and processes in response to the evolving demands for financial services and the entrance of new competitors, such as out-of-market banks and fintech firms,” the OCC said. "Failure to innovate to meet evolving needs or financial services may place a bank at a competitive disadvantage."

In December the OCC announced plans to create a new chartering system for fintech firms which will bring them into a federally regulated banking system and allow them to operate across state lines.

The move raised concern from a number of incumbent US banks concerned that they will be competitively disadvantaged but the Comptroller Thomas Curry has insisted that it is preferable to have fintechs enter the federal banking system "through a clearly marked front gate, rather than in some back door, where risks may not be as thoughtfully assessed and managed to bring them into a federally regulated banking system".

The OCC's report also mentions the growing operational risks facing banks as a result of "changing cyber security threats" and "an increased reliance on third party relationships".

Comments: (1)

Gerard Hergenroeder
Gerard Hergenroeder - IBM - New York | 06 January, 2017, 15:39

One of the biggest consequences of the great recession is the emergence of Fintechs that have arisen from a lack of innovation within the U.S. banking system. Fintechs have stepped in to do things that banks would have traditionally done 25 years ago. Bank management has been forced to concentrate on making the regulators happy for the past 10 years.

What happens if the regulatory burden is eased on the banking community? In theory capital would be available to enable innovation. The question then is whether today's bank management has the capacity to act more like a Fintech Vs a bank. At some point Fintechs could look more like banks, and banks look like Fintechs. It will be interesting watching this convergence in the next 10 years.

2 thumb ups! 2 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

OCC to offer fintech firms bank charter status

OCC to offer fintech firms bank charter status

02 December 2016  |  9910 views  |  1 comments | 25 tweets | 17 linkedin
OCC sets up fintech innovation office

OCC sets up fintech innovation office

27 October 2016  |  10877 views  |  0 comments | 19 tweets | 14 linkedin
Financial fraudsters hit every 15 seconds over the past six months

Financial fraudsters hit every 15 seconds over the past six months

21 September 2016  |  4115 views  |  0 comments | 7 tweets | 7 linkedin
Wells Fargo fined $185m for opening millions of accounts without customers' knowledge

Wells Fargo fined $185m for opening millions of accounts without customers' knowledge

08 September 2016  |  8290 views  |  3 comments | 12 tweets | 21 linkedin
OCC may create innovation unit to help banks compete with fintech firms

OCC may create innovation unit to help banks compete with fintech firms

13 August 2015  |  10888 views  |  0 comments | 28 tweets | 10 linkedin
US regulator orders banks to disclose hidden fees for gift cards

US regulator orders banks to disclose hidden fees for gift cards

15 August 2006  |  5614 views  |  0 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.niceactimize.comvisit www.response.ncr.comDownload the paper now

Top topics

Most viewed Most shared
BBVA launches Open API marketplaceBBVA launches Open API marketplace
13166 views comments | 50 tweets | 79 linkedin
Bank/fintech collaboration can take transaction banking to new heightsBank/fintech collaboration can take transa...
7758 views comments | 12 tweets | 24 linkedin
R3 raises $107mR3 raises $107m
6915 views comments | 16 tweets | 16 linkedin
TransferWise launches multi-currency business bank accountsTransferWise launches multi-currency busin...
6813 views comments | 12 tweets | 20 linkedin

Featured job

Six Figure Base + Commission + Stock Options
London

Find your next job