WASHINGTON–NCUA’s director of financial technology and ACCESS, offered an update to Congress on how the agency is using technology and improve financial inclusion, using the opportunity to also again request NCUA oversight of third parties at the same time five-dozen CUs are suffering an outage due to an outside vendor.
Testifying before the House Subcommittee on Digital Assets, Financial Technology and Inclusion, Charles Vice said that during his three decades of experience as a regulator overseeing financial institutions he has witnessed the resiliency of the credit union and banking industries in the face of challenges, and also seen how technology can be “both a boon and a bane.
“On one hand, technology can improve efficiency, facilitate better communication with members, and offer round-the-clock services,” Vice said. “On the other hand, technology presents risks that must be managed, monitored, and mitigated. The NCUA understands this fine balance.”
Working to Identify Barriers
In his prepared remarks, Vice outlined how the agency’s Office of Financial Technology and ACCESS (Advancing Communities through Credit, Education, Stability, and Support) has worked to identify identifies barriers, challenges, and opportunities credit unions face in adopting and using technology to provide services to members, and noted the board has recently adopted the financial innovation rule, which seeks to provide additional flexibility for federally insured credit unions to use advanced technologies and opportunities offered by the financial technology sector.
In addition, Vice said NCUA is “committed to promoting effective and efficient uses of emerging technology, including initiatives related to virtual exams and its Digital Asset Working Group.
In addition, he said “the NCUA is also evaluating digital identification technology. The use of digital identification can be a reliable tool for verifying identity and is becoming increasingly popular with a number of states issuing mobile driver’s licenses. Some credit unions have completed successful pilot tests using digital identification and have updated their policies and procedures to incorporate this technology for onboarding new members.”
Additional Points Made
Other points made by Vice during his prepared testimony included:
The ACCESS Initiative
Vice shared with the committee how in 2020 NCUA launched the ACCESS initiative—Advancing Communities through Credit, Education, Stability, and Support—which seeks to promote financial inclusion using technology to achieve its goals. “The NCUA is actively working to establish plans, objectives, and research to enhance financial inclusion through technology,” he said, adding that in 2024, ACCESS will spearhead an initiative to improve access to financial services in financial deserts.
Third-Party Vendor Authority
In a point frequently raised by NCUA representatives when testifying beforeCongress, Vice again said NCUA needssupervisory examination authority over credit union service organizations and third-party vendors, saying it is a “noteworthy vulnerability” for the system. The request comes at the same time at least 60 CUs are suffering outages due to a third-party ransomware issue, as CUToday.info has reported here.
“Credit unions increasingly partner with third-party vendors to enhance their products and services, make their programs cost-effective, provide access to expertise, and promote programs that may not be feasible if provided independently,” Vice stated. “The pandemic has accelerated the industry’s shift to digital services, which has increased the industry’s reliance on such vendors.”
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