WASHINGTON—Fintech holds great promise to expand credit, Federal Reserve Vice Chair for Bank Supervision Randal Quarles told a forum on financial services for the underserved this week.
“(Fintech) may enable credit to be underwritten and delivered in a manner that is still prudent but with greater efficiency, convenience, and lower processing costs,” Quarles said, according to a Forbes report.
While promoting the advantages of algorithm credit rating and other forms of fintech, he voiced it is important for banks to understand the risks when they offer new products of their own or partner with emerging fintech companies, Forbes reported.
Quarles said it’s important for the Fed itself gauge the upsides and downsides itself. Towards that end, he said the regulator is actively studying fintech's opportunities and risks and assessing policy and supervisory implications.
Touching on another issue, Quarles said the decline in lending by small banks to small businesses can be attributed in part by entrepreneurs using big bank credit cards, Forbes reported.
However, he acknowledged this avenue of credit is more expensive and less flexible than traditional bank loans.
“Personal or business credit cards may be suitable for purchasing supplies, but not for payroll,” Quarles added.
Small business loans are probably getting into the hands of white male headed companies disproportionately compared to their women- and minority- run peers, Quarles suggested.