NAFCU outlines reg approach to bolster CU, fintech relationships
Now available is a new NAFCU whitepaper that charts a path forward for regulatory coordination in order to achieve an even playing field between traditional financial institutions and fintech companies. Through its recommendations, the association seeks to empower credit unions with the tools to innovate and serve their communities better and more efficiently, while ensuring proper congressional and regulatory oversight of fintech.
"To remain competitive and relevant in today's financial marketplace, credit unions must consider whether to invest in new technologies, partner with fintech companies, or focus on existing services to achieve member satisfaction and growth," the association notes in the report. "As part of this strategic process, credit unions should be aware that regulatory expectations for financial technology are also in a state of flux."
NAFCU, in the whitepaper, provides detailed insights into the fintech landscape related to lending and credit, payments, blockchain and virtual currencies, and data aggregation and analytics. The association has worked closely with the Federal Reserve and other stakeholders on making the U.S. payments system faster and more secure, and is also a member of two blockchain consortia to give credit unions direct access to use cases being developed.
The whitepaper also includes an overview of political and regulatory efforts related to fintech. The House Financial Services Committee recently released its fall priorities, which includes "encourage[ing] and regulat[ing] innovation" with its two new task forces on fintech and artificial intelligence; NAFCU has shared with lawmakers numerous times its position on the issue. Banking regulators are also working on specialized chartering options, regulatory sandboxes and data sharing principles to promote innovation.
Given the complexity of the issue, NAFCU specifically recommends that the Federal Financial Institutions Examination Council (FFIEC) – comprised of five banking regulators, including the NCUA and CFPB, and state regulator representatives – form a subcommittee on emerging technology to monitor the risks posed by fintech companies and develop a joint approach for facilitating innovation within the financial sector. The subcommittee should:
- annually report to Congress its findings, including a determination of whether regulatory reforms are necessary to mitigate supervisory gaps resulting from fintech business models or entirely new applications of technology;
- define the parameters of responsible innovation to ensure consistent examination of emerging technologies. In doing so, the subcommittee should distinguish traditional banking activities from non-traditional activities;
- identify best practices for responsible innovation that reflect the constraints of different industry segments within the financial sector; and
- formally recommend to Congress ways to improve financial laws to allow FFIEC regulated institutions to adopt new technologies more easily and with greater legal certainty.
NAFCU remains committed to ensuring a level playing field for credit unions and will continue to monitor the financial services landscape for potential changes that could impact the industry.