United States: OCC Issues FinTech White Paper Indicating Openness to 'Responsible Innovation'

On March 31, 2016, the Office of the Comptroller of the Currency ("OCC") issued its much-anticipated white paper on the growing intersection between financial services and technology, or "FinTech." In his prepared remarks at Harvard's Kennedy School of Government announcing the white paper, Comptroller Curry signaled the OCC's openness to the FinTech industry: "Not every innovation is appropriate for a regulated financial institution, and not every innovation that is appropriate for a regulated institution is appropriate for all regulated institutions. But avoiding new approaches completely is equally dangerous. Banks have to continuously adapt to prosper, and we, as regulators, have to be knowledgeable enough to understand new technology and nimble enough to render timely decisions on matters requiring regulatory approval, as well as guidance about our supervisory expectations." Comptroller Curry's remarks echo recent comments by OCC Chief Counsel Amy Friend: "There are so many disparate points of entry now and we don't have a way to collect all of that information and come up with a consistent way of evaluating something that's innovative and then rendering an opinion." Ms. Friend's candor about the OCC's lack of an internal infrastructure that is currently ready to be fully responsive to innovation, and the OCC's commitment to move toward becoming a regulator that is more receptive to responsible innovation, further confirms the OCC's status as a business-friendly, proactive regulator intent upon fostering a competitive financial marketplace.

In announcing this focus on the FinTech industry, the OCC provided the following definition of "responsible innovation" to help guide the discussion: "The use of new or improved financial products, services, and processes to meet the evolving needs of consumers, businesses, and communities in a manner that is consistent with sound risk management and is aligned with the bank's overall business strategy." In further support of the OCC's development of its own framework for understanding and evaluating innovative products, services, and processes at OCC-regulated banks (national banks and federal savings associations), the OCC will follow eight guiding principles: (1) Support responsible innovation; (2) Foster an internal culture receptive to responsible innovation; (3) Leverage agency experience and expertise; (4) Encourage responsible innovation that provides fair access to financial services and fair treatment of consumers; (5) Further safe and sound operations through effective risk management; (6) Encourage banks of all sizes to integrate responsible innovation into their strategic planning; (7) Promote ongoing dialogue through formal outreach; and (8) Collaborate with other regulators. We have summarized each of these guiding principles below.

OCC's 8 Principles for Being Responsive to FinTech Innovation

1 - Support Responsible Innovation
The OCC is considering several possible approaches that it, as a bank regulatory agency, can take to better support its supervised banks in developing innovative products and services. Currently, banks may seek OCC input through formal or informal channels, such as meeting with the bank's examination team, requesting a legal opinion, or filing a regulatory application. In order to become more proactive in assisting banks, the OCC is considering as one possible approach the creation of a centralized office on innovation that would serve as a forum to vet ideas before a bank or nonbank makes a formal request or launches a product or service. This office may also hold meetings with interested stakeholders, or leaders from the FinTech industry. The OCC is also looking at ways that it can streamline the application process, as well as considering the development of new procedures where existing procedures may not work for certain innovative activities.

2 - Foster an Internal Culture Receptive to Responsible Innovation
The OCC acknowledges that "a key component of a successful framework is an agency culture that is receptive to responsible innovation." The OCC notes that it will develop or augment existing training to better enable OCC examination, legal, and other functions to be more responsive to innovation.

3 - Leverage Agency Experience and Expertise
In addition to its existing team of examination, legal, and information technology professionals, the OCC is considering designating lead experts on responsible innovation who could support bank supervision and provide advice based on a broad view of innovation trends and developments across the federal banking system. This would be similar to the existing lead expert program in retail and commercial credit, compliance, bank information technology, asset management, and operational risk to support examiners and supervised banks.

4 - Encourage Responsible Innovation that Provides Fair Access to Financial Services and Fair Treatment of Consumers
Similar to regulatory review required of other financial products and transactions, the OCC will consider if and how proposed innovation will help banks to fulfill their public purpose in promoting fair access to financial services and fair treatment of consumers. The OCC is planning on sharing success stories describing how supervised banks have innovated to increase access to unbanked and underbanked populations; to increase the speed, efficiency, effectiveness, and transparency of financial transactions; and to lend and invest in ways designed to address the credit needs of low- and moderate-income individuals and communities. The OCC may also issue new guidance on how innovation may intersect with the requirements under the Community Reinvestment Act ("CRA"), perhaps by issuing new supplemental CRA Q&As.

5 - Further Safe and Sound Operations Through Effective Risk Management
According to the OCC: "Effective risk management and good corporate governance are fundamental for banks to develop new products, services, and processes successfully." The OCC stresses that banks of all sizes "should ensure that effective corporate governance and risk management meet supervisory expectations when considering new products, services, and processes." This includes expectations described in OCC guidance related to strategic planning, evaluating new products and services, using models, operational risk, cybersecurity, and managing third-party relationships.

6 - Encourage Banks of All Sizes to Integrate Responsible Innovation into Their Strategic Planning
The OCC notes that a bank's decision to offer innovative products and services should be consistent with the bank's long-term business plan, rather than following the latest fad or industry trend. Any innovation proposal must consider the traditional strategic planning criteria, such as: (1) Consistency with the bank's corporate governance, business plan, and risk appetite; (2) Realistic financial projections; (3) Adequate staff, both in number and expertise; (4) Technology support; (5) Consideration of all applicable risks, including reputation and compliance, and appropriate risk management systems and practices; and (6) Exit strategies.

7 - Promote Ongoing Dialogue Through Formal Outreach
The OCC intends to incorporate outreach to all stakeholders, including banks, nonbank innovators, and consumer groups in order to stay abreast of the cutting-edge trends, developments, and issues of the FinTech industry. As part of this effort, the OCC is planning to hold workshops and meetings to discuss responsible innovation. The OCC also intends to host "innovator fairs" to bring together banks and nonbank innovators, with OCC experts to further share ideas on how regulators can be responsive to innovation.

8 - Collaborate with Other Regulators
The OCC has made clear that it will partner and share information with other federal and state regulatory agencies, including specifically the Consumer Financial Protection Bureau ("CFPB"). This, the OCC expects, will help to "promote a common understanding and consistent application of laws, regulations, and guidance."

Implications for Banks and the FinTech Industry The OCC's FinTech white paper is certainly good news for the banking and technology industries on many levels.

As a threshold matter, it sends a strong signal that the country's premier banking regulator appreciates the important and emerging role that FinTech plays. For a regulatory agency created at the urging of President Lincoln in 1863, it is truly refreshing that the OCC is constantly searching for ways to be more adaptive to the changing financial services environment.

Second, and of particularly welcomed news, the OCC appears committed to facilitating discussions between innovators and regulators early-on in the development process. By the OCC making its examination, legal, and information technology professionals available to innovators, such innovators will be in a better position to evaluate the regulatory implications and permissibility of proposals at the inception of design and development, before too many resources are devoted to a project that may carry fatal regulatory flaws.

Third, we are likely to see increased collaboration between the OCC and the CFPB in the evaluation of innovative products and services. This may take two forms. On a macro level, we may see the OCC and CFPB collaborate in terms of setting examination guidelines for the development of consumer financial products and services. On a more micro level, we may also see innovators engaging in consultations with the OCC examiners simultaneously with CFPB examiners. This would help to avoid inconsistencies between regulators, and allow for greater brainstorming of the supervisory implications of new proposals. I suspect that we are not likely to see greater collaboration between the OCC and the Federal Deposit Insurance Corporation or the Federal Reserve Board, as, unlike those prudential regulators, the OCC (as a chartering agency) determines the powers of its supervised institutions, which is fundamental to product and service innovation, i.e., a supervised bank must first have the authority to offer the item.

Fourth, the OCC's announcement may signal an openness to small-dollar lenders. In its white paper, the OCC notes that "there is great potential for responsible innovation to broaden access to financial services by delivering more affordable products and services on suitable terms to unbanked, underbanked, and low- to moderate-income consumers," particularly through small-dollar, unsecured consumer loans. This is an area where lenders of all types have found themselves caught between public policy goals of providing access to credit to a population that is often shut out of the market, and offering an inherently risky product (small-dollar unsecured loans).

Fifth, the OCC was careful to note that in evaluating financial innovation proposals, it will consider the application of the OCC's third-party relationships guidance, which requires banks to be vigilant in vetting potential third parties, evaluating contract provisions, and conducting ongoing monitoring of third parties. For technology companies that want to partner with banks, this will mean that while the OCC may be more open to cross-collaboration in the FinTech industry, the price for entering into a relationship with a national bank or federal savings association will continue to be consenting to a certain degree of OCC oversight of that relationship.

Conclusion On the whole, the OCC's message is clear – bank regulators are open to technological innovation. Comptroller Curry made this evident in his remarks: "[W]e want to foster an internal culture that is receptive to new technology and new ways of doing business." The challenge for the banking and technology industries will be to assist the OCC in helping the agency to establish a structure that is responsive to the constantly evolving technological world, while allowing for appropriate deliberation on how that technology impacts safety and soundness.

Industry can begin to meet this challenge immediately by reviewing the nine questions posed at the end of the OCC white paper under "Request for Comments." This section provides a crucial opportunity for banks and technology companies to help influence the tone and direction for the continued discussion of the appropriate role that the OCC should have in creating an environment that encourages and facilitates responsible innovation. These comments can be submitted either directly by a bank or technology company, or through a third party, such as outside regulatory counsel.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Carlton Fields
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Carlton Fields
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions