Recent OCC Report Highlights Potential Fintech Risks

The Office of the Comptroller of the Currency (OCC) recently released their Semiannual Risk Perspective report. The report focuses on current issues that could pose a risk to bank safety and compliance in the future. A featured future risk is the increase of financial innovation, financial technology (fintech), and regulatory technology (regtech).

“While innovation is not new to the banking industry, the pace of change and the transformative nature of technology may result in a more complex operating environment,”  the OCC said. “Innovation can enhance a bank’s ability to compete by introducing new ways to meet customer product and service needs, improve operating efficiencies, and increase revenue. Changing business models or offering new products and services can, however, elevate strategic risk when pursued without appropriate corporate governance and risk management.”

Many fintechs and other nonbanking entities are now providing services and products which used to be only offered by banks. Payment processing, retail loans, and small business banking are often faster and easier to obtain through fintech companies. The OCC has raised concerns over credit quality, operational risks as banks try to match the quickly changing financial environment, and compliance risks. Also mentioned in the report are interest rate risk and the related liquidity risk implications.

The OCC says they continue to monitor these risks closely and implement actions to address concerns. To read the full report, click here.