As we were all expecting, the OCC in 2025 is making some bold changes. Reading through the speeches given so far this year, there are 4 key priorities that we think banks should be paying attention to:
We are sharing our thoughts on each of these priorities (you can read about Bank-Fintech Partnerships here and Digital Assets here), and today we are talking about financial inclusion.
Acting Comptroller Hood spent a lot of time talking about the seventy million Americans who are "credit invisible," and the 40% of households that can't cover a $400 emergency. He has also said that, “financial inclusion is more than just a regulatory objective; it is a cornerstone of economic empowerment.”
Serving these customers is not only a way to build regulatory goodwill, but will provide massive market opportunities for the banks that can do so sustainably.
"A bank account is a starting point in financial inclusion, not an end point. This first bank account can lead to longer-term savings, access to credit, 401(k) and other retirement accounts, and wealth-building opportunities." (source)
Through their restructured Project REACh, the OCC has outlined four work streams that they want banks to consider: affordable homeownership, small business support, technology integration, and geographic-specific efforts. Banks that participate will get regulatory goodwill and access to collaborative innovation opportunities.
And it’s a sensible business decision too - underbanked customers who gain access to mainstream financial services often become highly loyal, profitable customers over time. They refer friends and family, use multiple products, and represent significant growth potential.
Here are some of the opportunities that exist to increase financial inclusion.
Regulators want banks to expand credit access using alternative data in a responsible way. By using cash flow analysis, rent payment history, and banking behavior to create credit profiles for thin-file customers, banks can open lending opportunities that competitors using only traditional FICO scores can't access.
Partnering with down payment assistance programs and community organizations can enable banks to provide mortgage products to first-time buyers. Homeownership lending creates long-term customer relationships.
Gig economy workers, immigrant entrepreneurs, and small business owners in underserved communities need banking relationships and often find it hard to open accounts. Banks that can serve these markets efficiently will capture growth that competitors often miss.
Serving more underbanked customers is not just a case of rolling out existing products to a wider audience. There are different risks with similar looking products, and entirely new products that can be offered. Consider and decide upon a risk appetite before landing on your first product in order to address real customer pain points within the bounds of your core competencies.
Manual processes can make underbanked customers unprofitable. You will need to invest in technology that automates various elements of the customer journey, so consider and decide on where to focus your time and money. Should it be during account opening, underwriting, or servicing? Does your Board care most about compliance testing? Use technology to reduce the cost of serving these customers to ensure sustainable revenue growth.
Banks that parachute into underserved communities with generic products fail. It takes a clear strategy and hard work to build genuine community relationships and design products based on actual customer needs and feedback. Do this by nurturing relationships with Community Development Financial Institutions (CDFIs), community organizations, and local groups that already serve underbanked populations. Done well, these partnerships will yield customer acquisition channels and community credibility.
Serving underbanked customers requires different skills and approaches than serving prime customers. Train staff on new products, customer needs, alternative credit factors, and community partnership management.
Acting Comptroller Hood has restructured the OCC's entire external relations strategy around financial inclusion. Regulators will reward banks that lead on this issue and scrutinize banks that don't.
But, all that aside, just consider how there are 70 million credit-invisible Americans which you can think of as the largest untapped customer acquisition opportunity in banking today.
Banks that work out how to serve these customers profitably will capture immense market share and build long-term sustainable revenue streams with a loyal customer base.
Get in touch with us today to discuss the compliance requirements as you build new products.
The OCC’s Priorities in 2025: Bank-Fintech PartnershipsAs we were all expecting, the OCC in 2025 is making some bold changes. Reading through the speeches given so far this year, there are 4 key priorities that we think banks should be paying attention to:
We are sharing our thoughts on each of these priorities (you can read about Bank-Fintech Partnerships here and Digital Assets here), and today we are talking about financial inclusion.
Acting Comptroller Hood spent a lot of time talking about the seventy million Americans who are "credit invisible," and the 40% of households that can't cover a $400 emergency. He has also said that, “financial inclusion is more than just a regulatory objective; it is a cornerstone of economic empowerment.”
Serving these customers is not only a way to build regulatory goodwill, but will provide massive market opportunities for the banks that can do so sustainably.
"A bank account is a starting point in financial inclusion, not an end point. This first bank account can lead to longer-term savings, access to credit, 401(k) and other retirement accounts, and wealth-building opportunities." (source)
Through their restructured Project REACh, the OCC has outlined four work streams that they want banks to consider: affordable homeownership, small business support, technology integration, and geographic-specific efforts. Banks that participate will get regulatory goodwill and access to collaborative innovation opportunities.
And it’s a sensible business decision too - underbanked customers who gain access to mainstream financial services often become highly loyal, profitable customers over time. They refer friends and family, use multiple products, and represent significant growth potential.
Here are some of the opportunities that exist to increase financial inclusion.
Regulators want banks to expand credit access using alternative data in a responsible way. By using cash flow analysis, rent payment history, and banking behavior to create credit profiles for thin-file customers, banks can open lending opportunities that competitors using only traditional FICO scores can't access.
Partnering with down payment assistance programs and community organizations can enable banks to provide mortgage products to first-time buyers. Homeownership lending creates long-term customer relationships.
Gig economy workers, immigrant entrepreneurs, and small business owners in underserved communities need banking relationships and often find it hard to open accounts. Banks that can serve these markets efficiently will capture growth that competitors often miss.
Serving more underbanked customers is not just a case of rolling out existing products to a wider audience. There are different risks with similar looking products, and entirely new products that can be offered. Consider and decide upon a risk appetite before landing on your first product in order to address real customer pain points within the bounds of your core competencies.
Manual processes can make underbanked customers unprofitable. You will need to invest in technology that automates various elements of the customer journey, so consider and decide on where to focus your time and money. Should it be during account opening, underwriting, or servicing? Does your Board care most about compliance testing? Use technology to reduce the cost of serving these customers to ensure sustainable revenue growth.
Banks that parachute into underserved communities with generic products fail. It takes a clear strategy and hard work to build genuine community relationships and design products based on actual customer needs and feedback. Do this by nurturing relationships with Community Development Financial Institutions (CDFIs), community organizations, and local groups that already serve underbanked populations. Done well, these partnerships will yield customer acquisition channels and community credibility.
Serving underbanked customers requires different skills and approaches than serving prime customers. Train staff on new products, customer needs, alternative credit factors, and community partnership management.
Acting Comptroller Hood has restructured the OCC's entire external relations strategy around financial inclusion. Regulators will reward banks that lead on this issue and scrutinize banks that don't.
But, all that aside, just consider how there are 70 million credit-invisible Americans which you can think of as the largest untapped customer acquisition opportunity in banking today.
Banks that work out how to serve these customers profitably will capture immense market share and build long-term sustainable revenue streams with a loyal customer base.
Get in touch with us today to discuss the compliance requirements as you build new products.
