United States: FinTech Developments: OCC Adopts Innovation Framework Recommendations

 The Office of the Comptroller of the Currency ("OCC") has adopted recommendations developed by its Innovation Framework Development Team that address measures for the OCC to take to encourage the development of FinTech products and services. This initiative by the OCC will affect banks as well as other providers of financial services such as credit unions, consumer finance companies and mortgage lenders.

 This action by the OCC follows closely on the heels of the introduction of the "Financial Services Innovation Act of 2016" ("FSIA") by Representative Patrick McHenry, which is intended to encourage the development of financial products and services by FinTech innovators and mandates that each federal banking agency establish a Financial Services Innovation Office. The OCC's guidance is also intended to address some of the concerns raised by commenters to the OCCs' white paper, published in March 2016, which established eight principles for developing a framework for evaluation of FinTech products and services. These include supporting responsible innovation, encouraging responsible innovation that provides fair access to financial services and fair treatment of consumers and collaborating with other regulators.

Innovation Framework Development Team Recommendations

Office of Innovation

 An Office of Innovation (the "Office") will be established to serve as a central point of contact and facilitate responses to inquiries and requests for interpretation of regulations by financial institutions and FinTech companies. It will also conduct outreach and provide technical assistance and collaborate with domestic and international regulators. The Office will report directly to the Comptroller. The Office will consist of a Chief Innovation Officer, an Innovation Technician and other Innovation Officers and Innovation Fellows. The use of Innovation Fellows is intended to enable the Office to leverage the experience and knowledge of academics, consumer and community activists and the private sector and share and transfer OCC knowledge on regulation and supervision to the Fellows. A Responsible Innovation Committee consisting of Deputy Comptrollers and Directors of OCC business units will be established to advise the Office and promote collaboration across agency business units.

Outreach and Technical Assistance Program

A robust program will be established for outreach and technical assistance related to innovation. The OCC recognized that while the outreach strategy can leverage existing avenues for banks, the community and consumer groups, a formal outreach program for nonbanks needs to be developed. The outreach program would include a periodic Responsible Innovation Forum as well as organized innovation workshops and roundtables on specific topics. A dedicated web page would also be developed to provide resource materials and technical information and to solicit feedback on innovation issues. Through the program, the Office would offer technical assistance, resource materials on regulatory principles, processes and expectations, to banks and FinTech companies, and would design "rules of the road" for nonbank companies.

Conduct Awareness and Training Activities

In order to increase awareness of regulatory challenges facing FinTech companies and financial institutions, the OCC will establish an Innovation Networking Group and create other means to promote awareness of industry innovations among its staff. The OCC will develop a process to review and update training programs in response to industry trends and to address new products and services.

Encourage Coordination and Facilitation

The OCC noted that a number of commenters to its white paper stated that regulatory uncertainty, lack of transparency and inconsistency in the decision-making process deter innovation. The Innovation Framework Development Team recommended that the OCC establish specific process steps with timeframes and responsible parties for innovation inquiries and requests for regulatory interpretation, including:

  • develop and promote optional agency participation in bank-run pilot programs that test innovative products, services and processes and that meet at least one of the following objectives: (1) fostering responsible innovation by OCC supervised banks, (2) furthering the OCC's understanding of innovative products, services, processes or technologies or (3) facilitating OCC policy objectives. Eligible participants would include banks and significant service providers, FinTech companies in partnership with banks, and other regulators;
  • develop a research function within the Office to collect information on the effect of specific innovations and industry technology trends on the banking industry; and
  • use research and dialogue with industry, consumer and community groups to inform policy and guidance in order to update, modernize or clarify a range of guidance documents, with a focus on the most common areas noted by commenters: third-party risk management, partnerships, collaboration and the Community Reinvestment Act.

Promote Interagency Collaboration

The OCC will leverage its existing cooperative efforts with other domestic and foreign regulatory agencies to discuss innovation in the industry, share information to increase knowledge, develop consistent approaches and provide a clear message to the industry.

A Continuing Evolution

Over the last several years a large and growing number of FinTech companies have emerged to provide financial products and services through alternative platforms and delivery channels. These companies engage in the traditional banking functions of consumer lending (e.g., Lending Club, Prosper), payments (e.g., Apple Pay) and wealth management (e.g., Betterment). They are leveraging new technologies and processes such as cloud computing, application programming interfaces, distributed ledgers (blockchain), artificial intelligence and big data analytics. In addition, banks are increasingly collaborating with, providing venture funding to, and in some cases acquiring, FinTech companies as the banks recognize the value and efficiency of the FinTech companies' innovations and product offerings.

The OCC Innovation Framework Development Team's recommendations are only the first step towards comprehensive regulatory guidance for FinTech companies and financial institutions. As the recommendations are implemented and additional guidance is issued, the tradeoff for certainty and transparency for FinTech companies and financial institutions will likely be increased regulatory scrutiny, risk-management obligations and compliance programs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Cadwalader, Wickersham & Taft LLP
Morrison & Foerster LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Cadwalader, Wickersham & Taft LLP
Morrison & Foerster LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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.

Disclaimer

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.

General

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