ARLINGTON, Va.— NAFCU has introduced a white paper that it says charts a path forward for regulatory coordination in order to achieve an even playing field between traditional financial institutions and fintech companies, the trade association said.
"To remain competitive and relevant in today's financial marketplace, credit unions must consider whether to invest in new technologies, partner with fintech companies, or focus on existing services to achieve member satisfaction and growth," the association notes in the report. "As part of this strategic process, credit unions should be aware that regulatory expectations for financial technology are also in a state of flux."
In the white paper, NAFCU provides detailed insights into the fintech landscape related to lending and credit, payments, blockchain and virtual currencies, and data aggregation and analytics.
The white paper also includes an overview of political and regulatory efforts related to fintech. The House Financial Services Committee recently released its fall priorities, which includes "encourage[ing] and regulat[ing] innovation" with its two new task forces on fintech and artificial intelligence, NAFCU noted.
NAFCU is recommending the Federal Financial Institutions Examination Council (FFIEC) – comprised of five banking regulators, including the NCUA and CFPB, and state regulator representatives – form a subcommittee on emerging technology to monitor the risks posed by fintech companies and develop a joint approach for facilitating innovation within the financial sector.
The Recommendations
The recommendations include:
- Annually report to Congress its findings, including a determination of whether regulatory reforms are necessary to mitigate supervisory gaps resulting from fintech business models or entirely new applications of technology
- Define the parameters of responsible innovation to ensure consistent examination of emerging technologies. In doing so, the subcommittee should distinguish traditional banking activities from non-traditional activities
- Identify best practices for responsible innovation that reflect the constraints of different industry segments within the financial sector
- Formally recommend to Congress ways to improve financial laws to allow FFIEC regulated institutions to adopt new technologies more easily and with greater legal certainty