In an address on Friday before the National Community Reinvestment Coalition in Washington, D.C., Comptroller of the Currency Thomas J. Curry discussed the competition banks are facing from new and sophisticated financial technology companies, or “fintechs” as they are commonly known-but he said it would be “wrong to assume” that fintechs will replace banks.
Curry noted the effect that technological advances are having on the financial industry and that many tech-savvy consumers prefer to conduct financial transactions with computers and smart phones at an hour of their choosing, regardless of the time of day or night. He cited as examples accessing cash from ATMs, chatting via text with customer service to resolve problems, or making payments to friends or applying for a loan via smartphone.
“The shift in how consumers access financial services obviously poses a challenge to banks, which are competing in this arena against nimble and sophisticated financial technology companies—“fintechs” for short,” Curry said. “Many fintechs do business exclusively via the Internet, using online and mobile applications. They’re very new. So many of them have designed and built their systems to match their particular business model.”
By comparison, the legacy technology systems of banks are outdated and expensive to modify or replace. Not only that, but the extensive branch networks of many banks is a costly physical infrastructure to maintain.
“However, it would be wrong to assume that fintechs will replace banks and the products and services they offer through established branch networks,” Curry said. “I believe the national banks and federal savings associations supervised by the OCC are as nimble and innovative as the new financial technology startups. The fact is that innovation has been a hallmark of the U.S. banking system since it was created in 1863 at the behest of President Lincoln.”
“Banks are engaged in research to help them adapt to rapid technological change.”
Thomas Curry, Comptroller of the Currency
Curry noted that national banks and federal thrifts have always adapted and evolved as their customers’ needs and expectations changed, and today is no different.
“Banks are engaged in research to help them adapt to rapid technological change,” Curry said. “Some banks are building innovative solutions in-house. Other banks are purchasing so-called ‘white label’ solutions to enhance their existing technology platforms, and some are pursuing strategic partnerships with fintechs in order to bring new solutions onboard more quickly.”
Innovation allows banks to offer more products to better serve customers and to offer those products at a lower cost, and it also allows the banks to reach more customers and make branch networks more efficient, Curry said.
“The OCC is committed to supporting responsible bank innovation,” he said. “Last August, I announced an initiative to develop a comprehensive framework to improve the OCC’s ability to identify and understand new and emerging trends and innovations in the financial services industry, as well as the evolving needs of consumers of financial services. This framework will outline our views on responsible innovation and enable us to more efficiently evaluate innovative products, services, or processes that require regulatory approval and identify potential risks associated with adoption.”
Click here to read Curry’s complete address.