As we were all expecting, the OCC under Acting Comptroller Rodney Hood is making some bold changes. Reading through his speeches so far this year, Acting Comptroller Hood has 4 key priorities that we think banks should be paying attention to:
Over the next few weeks we’ll be sharing our thoughts on each of these priorities. Today we are jumping into the first, bank-fintech partnerships, where the regulatory winds have most definitely shifted.
In Acting Comptroller Rodney Hood’s view, bank-fintech partnerships are not just a good idea—they're essential. In February, Hood said that fintech partnerships are "critically important" for banks to continue serving their clients, which, for a regulator, is a pretty clear call to action.
He also wants banks to start talking about these partnerships early, with their regulators.
“I would encourage you all to not only pursue the partnerships, but I'm going to encourage you all to talk to your supervisory examiners. No one wants to be surprised. So bring your examiners into the process early so that they can understand what it is that you're hoping to achieve with some of the partnerships.” (source)
Acting Comptroller Hood has given banks the green light to work with fintechs. But, why should banks do that, and what are the opportunities that exist?
There are a myriad of opportunities for banks to partner with fintechs to reduce cost, such as automated compliance testing, regulatory reporting, document processing and loan underwriting automation. But let’s not lie - everything that falls into the “increasing revenue” bucket is much easier to sell to your executive team. Here are some examples of ways to increase revenue and make your customers happier through working with fintechs:
By partnering with fintechs, banks can generate new revenue streams through:
Fintechs help banks improve customer experience, and therefore increase engagement and revenue, by:
As a bank thinking about entering into a fintech partnership, there are a handful of key decisions to make:
If you have the technical talent and timeline to build - and maintain - modern fintech capabilities in-house, then that’s the route you should take. If not, partnering for speed and experimentation, then deciding what to bring internal based on strategic importance and competitive differentiation, is very sensible. Here's our advice on building v buying.
You can't partner with every hot fintech company. You can’t increase revenue and improve customer experience and create operational efficiencies all at once. Focus on partnerships that complement your core competencies and help you achieve your specific strategic priorities first. Random innovation projects waste resources and confuse customers.
The sexiest fintech partnership becomes a customer experience disaster if systems don't integrate properly and the bank doesn’t have visibility into customers, transactions and data. Plan for integration complexity from day one, not as an afterthought.
The OCC expects "appropriate risk management frameworks" for fintech partnerships. This means robust third-party risk management, data security protocols and compliance oversight that matches the complexity of your partnerships. Don’t skip this step. Here's our guide on bank-fintech due diligence steps.
Banks that treat fintech partnerships as a side project handled by existing staff will lose to banks that create dedicated teams with clear accountability and decision-making authority. Hire people who have built successful programs before and give them the time to build the appropriate foundation.
Pick one partnership that addresses a specific strategic priority and execute it well. Learn from the experience, scale what works, and kill what doesn't. Repeat.
The biggest partnership failures happen when compliance is an afterthought. Bring them in during initial discussions so they become enablers rather than roadblocks.
The OCC has removed the regulatory uncertainty that has recently paralyzed bank-fintech partnerships. Banks that move fast with appropriate risk management will capture market opportunities that others miss.
Your customers are already banking with their phones. Your competitors are already partnering with fintech companies. The OCC is already providing regulatory clarity and support.
What are you waiting for?
Get in touch with us today for help in launching your own bank-fintech partnership.
Wolf & Company Selects Cable as Foundational Compliance Partner for Automated Control Testing
A Community Bank CCO’s Guide to Making Smart Decisions When the Rules Keep ChangingAs we were all expecting, the OCC under Acting Comptroller Rodney Hood is making some bold changes. Reading through his speeches so far this year, Acting Comptroller Hood has 4 key priorities that we think banks should be paying attention to:
Over the next few weeks we’ll be sharing our thoughts on each of these priorities. Today we are jumping into the first, bank-fintech partnerships, where the regulatory winds have most definitely shifted.
In Acting Comptroller Rodney Hood’s view, bank-fintech partnerships are not just a good idea—they're essential. In February, Hood said that fintech partnerships are "critically important" for banks to continue serving their clients, which, for a regulator, is a pretty clear call to action.
He also wants banks to start talking about these partnerships early, with their regulators.
“I would encourage you all to not only pursue the partnerships, but I'm going to encourage you all to talk to your supervisory examiners. No one wants to be surprised. So bring your examiners into the process early so that they can understand what it is that you're hoping to achieve with some of the partnerships.” (source)
Acting Comptroller Hood has given banks the green light to work with fintechs. But, why should banks do that, and what are the opportunities that exist?
There are a myriad of opportunities for banks to partner with fintechs to reduce cost, such as automated compliance testing, regulatory reporting, document processing and loan underwriting automation. But let’s not lie - everything that falls into the “increasing revenue” bucket is much easier to sell to your executive team. Here are some examples of ways to increase revenue and make your customers happier through working with fintechs:
By partnering with fintechs, banks can generate new revenue streams through:
Fintechs help banks improve customer experience, and therefore increase engagement and revenue, by:
As a bank thinking about entering into a fintech partnership, there are a handful of key decisions to make:
If you have the technical talent and timeline to build - and maintain - modern fintech capabilities in-house, then that’s the route you should take. If not, partnering for speed and experimentation, then deciding what to bring internal based on strategic importance and competitive differentiation, is very sensible. Here's our advice on building v buying.
You can't partner with every hot fintech company. You can’t increase revenue and improve customer experience and create operational efficiencies all at once. Focus on partnerships that complement your core competencies and help you achieve your specific strategic priorities first. Random innovation projects waste resources and confuse customers.
The sexiest fintech partnership becomes a customer experience disaster if systems don't integrate properly and the bank doesn’t have visibility into customers, transactions and data. Plan for integration complexity from day one, not as an afterthought.
The OCC expects "appropriate risk management frameworks" for fintech partnerships. This means robust third-party risk management, data security protocols and compliance oversight that matches the complexity of your partnerships. Don’t skip this step. Here's our guide on bank-fintech due diligence steps.
Banks that treat fintech partnerships as a side project handled by existing staff will lose to banks that create dedicated teams with clear accountability and decision-making authority. Hire people who have built successful programs before and give them the time to build the appropriate foundation.
Pick one partnership that addresses a specific strategic priority and execute it well. Learn from the experience, scale what works, and kill what doesn't. Repeat.
The biggest partnership failures happen when compliance is an afterthought. Bring them in during initial discussions so they become enablers rather than roadblocks.
The OCC has removed the regulatory uncertainty that has recently paralyzed bank-fintech partnerships. Banks that move fast with appropriate risk management will capture market opportunities that others miss.
Your customers are already banking with their phones. Your competitors are already partnering with fintech companies. The OCC is already providing regulatory clarity and support.
What are you waiting for?
Get in touch with us today for help in launching your own bank-fintech partnership.
