KODIAK, Alaska–Credit unions here were given an overview of some of the technology issues NCUA is thinking about.
Speaking to the Alaska CU League’s annual meeting here, Charles Vice, director of financial technology and ACCESS with the agency, touched on numerous tech-related matters in his remarks.
Vice noted, for instance, the agency has been working with the Census Bureau to identify financial deserts and then to overlay credit union locations over a map of those deserts to see where credit unions could potentially expand services.
Here are some of the issues he touched upon:
Virtual Examination Program
According to Vice, NCUA is exploring ways to use “data, advanced analytical tools, innovative technology and supervisory technology to enhance the existing virtual examination process.”
That also includes working with robotic process automation (RPA). He said the agency ran some exam processes through RPA and cut what was typically an eight to 10-hour task down to less than a minute.
Similarly, he said, NCUA has also been exploring the use of natural-language processing involving the taking of unstructured data and looking for anomalies and inconsistencies.
“It’s amazing how fast the technology can do that,” Vice told the meeting.
He further said NCUA plans to incrementally transform its current exam model based on research results, lessons learned from the offsite examination procedures, stakeholder outreach feasibility studies, pilot-based studies, and financial resource evaluation.
Fintech
When it comes to fintech, Vice said NCUA is focusing on credit unions’ use of the technology to:
- Improve operational efficiencies
- Implement member-facing financial services
- Promote financial inclusion
To that end, he said the agency has been thinking about conducting “technology sprints,” as other agencies have done, in which multiple stakeholders come together to examine related issues.
Open Banking
Vice reminded that Dodd Frank 1033 will go into effect in September.
The rule basically provides for open banking in the U.S., which means the right of the consumer to say, “That information is mine. You are safekeeping it for me. But if I want to grant someone access to that, I can, and you the financial institution has to grant the access to it.”
While the asset threshold carve-out of $10 billion excludes most credit unions, that will expire after several years.
Digital IDs
Digital IDs, basically digital driver’s licenses, are another area NCUA is watching, Vice said. As CUToday.info reported here, America First Credit Union in Utah is already accepting the mobile licenses as valid IDs. He noted one fintech is working on a solution similar to that of “Clear” at airports that would allow for biometric identification.
Artificial Intelligence
“AI is probably taking 65% to 70% of my time right now,” Vice said.
He noted the agency has spoken with various fintechs that are offering AI for:
- Data analysis
- Communication (chatbot and natural language processing)
- Underwriting/credit risk assessment
- Alternative credit scoring models
- Fraud detection
He said NCUA’s focus as been on:
- Inventory of use cases
- Guidance for employees
- Information for the industry
Two Notable Demo’s
Vice shared that one fintech gave the agency a demonstration of how it downloads all credit union data from call reports. It can then use that data to create models and adjustments of the balance sheet across a number of scenarios in what he described as being so fast it was “simply amazing.”
For instance, the AI could answer, “If we bought this portfolio with this yield with these credit characteristics, what does it do to our credit profile? It could provide a response in seconds,” Vice added.
Separately, it has also met with fintechs that use AI for people who have low to no credit that is “very predictive” of future behavior as a means of expanding credit.
“And some people with high credit score can be seen as at a higher risk of default,” he said.
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