Regulators Seeking More Details on Bank-Fintech Relationships

Federal regulators have recently sought comments on the relationships between financial institutions and the third parties—especially fintechs—that often partner with them. Agencies seeking better understanding include the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corp. (FDIC).

The agencies “seek public comment to build on their understanding of these arrangements, including with respect to roles, risks, costs, and revenue allocation,” they said, according to Consumer Finance Monitor. “The agencies also seek additional information and stakeholder perspectives relevant to the implications of such arrangements, including for banks’ risk management, safety and soundness, and compliance with applicable laws and regulations.”

The relationship between banks and fintechs can allow banks to leverage newer technology and offer innovative products to consumers. However, the agencies noted that those relationships can pose risks too, as the failure of banks managing fintechs may present concerns surrounding consumer protection, safety, and soundness. 

The federal agencies are also looking for information on how fintechs support increased consumer access to financial products and services. They have asked stakeholders about the range of practices for dealing with heightened risks, as well. 

Along with the request for more information, the agencies issued a statement highlighting the risks that fintechs and other third parties pose. Comments are due 60 days after the agencies’ request for information is published in the Federal Register.