COVID-19 has laid bare the need to have good technological solutions for the systems and services upon which we rely. In the financial sector, perhaps more than many others, the pace of innovation is beholden to regulatory parameters, but there is some optimism that Fintechs can help fill the gap in traditional financial products, especially in emerging markets. As in our in recent post about digital banking modernization by the OCC, regulators are feeling out the interest in certain programs. On Monday, July 20, 2020, the FDIC announced a request for public input on a certification program to “promote the efficient and effective adoption of innovative technologies at FDIC-supervised financial institutions.”

More specifically, the FDIC is seeking input regarding whether the development of relevant standards in connection with a voluntary certification process could be applied to third-party models and whether such standards would allow more financial institutions, particularly community banks, to engage with third parties that provide these models, including Fintechs. Such a voluntary certification program could, in theory, reduce costs of doing business for both the financial institutions and providers of models and permit FDIC supervision resources to be used more efficiently and effectively.

Ideally, a voluntary certification or assessment program would support the due diligence financial institutions conduct on third parties. The FDIC is primarily interested in input addressing the due diligence elements that would be applied to these third-parties for services that include both banking activities, like deposit, lending, and payment functions, and corporate activities, like payroll and human resources.

In its request for information, the FDIC proposes a “collaboration among an SSO [standard-setting organization], the FDIC, and other stakeholders to set standards under an SSO, along with a voluntary conformity assessment process through accredited, independent certification organizations.”

The comment period will be open for 60 days from publication, but we look forward to hearing more from the FDIC and the Fintech community on these questions and more like them.

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