American Fintech Council urges FDIC to renew innovation efforts
Background:
In recent news, the American Fintech Council (AFC) has called on the Federal Deposit Insurance Corp. (FDIC) to revive its innovation drive. The AFC expressed its concerns about the lack of effective communication and industry engagement from the FDIC regarding its office of innovation.
The FDIC’s office of innovation, known as FDITech, was established in 2019 with the aim of creating a more welcoming environment for banks to adapt to financial technology changes. However, in 2022, the office was repurposed following a proposal to eliminate it altogether.
AFC’s Criticism:
The AFC, in a letter signed by Ian Moloney, Senior Vice President and Head of Policy and Regulatory Affairs for the council, criticized the FDIC’s lack of effective communication and engagement with the industry. The letter urged the FDIC to carefully reconsider its posture towards innovation in financial services and to engage with responsible financial services companies.
Moloney proposed that the AFC could collaborate with the FDIC and other regulators to spur technological innovation in the financial services sector. The AFC stands ready and willing to work with the FDIC to develop regulatory frameworks that are adapted to the modern banking system, enhance the resilience of the banking system, and ensure effective service to consumers.
Changes to FDITech:
Earlier this year, FDITech underwent significant changes in its focus and structure. It shifted its focus from fostering innovation and now primarily serves within the FDIC’s IT services. Its primary focus is adopting technology within the FDIC rather than fostering innovation in the industry.
These changes were noted in a September report from the Government Accountability Office. The report highlighted that the FDIC’s budget proposal in 2022 suggested removing all funding for FDITech, resulting in the office being unstaffed by the end of the year.
The absence of FDITech is also noticeable in the FDIC’s annual report for 2022, as well as in its public statements since February 2022.
Opportunities for Collaboration:
Despite the changes to FDITech, the AFC believes there are still opportunities for effective collaboration between various divisions and offices within the FDIC. The council encourages the FDIC to work together with state and federal regulators to achieve their innovation goals.
By finding these opportunities for collaboration, the FDIC can better understand and interpret the trends, consumer benefits, and risk profiles associated with innovative business models, products, and services offered by regulated entities.
Impact on Innovation:
The AFC’s concerns echo those expressed by Republican lawmakers, Representatives Patrick McHenry, Andy Barr, and French Hill. They expressed their worry that the FDIC under the Biden administration has moved away from fostering innovation and instead hindered its progress.
Additionally, the lawmakers raised concerns about the lack of publicly available information on how the FDIC’s stance on innovation will be reflected in examinations. They also expressed concerns about the agency’s history of using extralegal pressures to achieve anti-business results.
The AFC and the lawmakers share the concern that the FDIC’s approach could potentially hinder the development of innovative products and services that benefit consumers and businesses.
Frequently Asked Questions (FAQs)
Q1: What is the American Fintech Council?
A1: The American Fintech Council (AFC) is an organization that advocates for technological innovation in the financial services industry. It aims to foster a more welcoming environment for fintech companies and promote collaboration between industry participants and regulators.
Q2: What is the FDIC’s office of innovation?
A2: The FDIC’s office of innovation, known as FDITech, was established in 2019 with the goal of facilitating the adoption of technological advancements in the banking sector. However, in 2022, the office was repurposed and its focus shifted to adopting technology within the FDIC itself.
Q3: Why is the AFC calling on the FDIC to revive its innovation drive?
A3: The AFC is concerned about the lack of effective communication and industry engagement from the FDIC regarding innovation in financial services. The council believes that a renewed focus on innovation is essential to better serve consumers and foster a resilient banking system.
Q4: How can the AFC collaborate with the FDIC?
A4: The AFC proposed that it can act as a collaborator with the FDIC and other regulators to drive technological innovation in financial services. The council is ready to work with the FDIC to develop pragmatic regulatory frameworks that cater to the modern banking system and promote innovation.
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