Season 2 | Ep. 22: 2024 Third-Party Risk Management Guidance: Phil Goldfeder, CEO, American Fintech Council

In the fast-paced world of FinTech, navigating regulatory landscapes requires a keen understanding of evolving standards and proactive collaboration. To help us better understand the regulatory environment between Banks, FinTechs and the Regulators we invited Phil Goldfeder, CEO of the American Fintech Council on to the show. Ed Vincent, CEO of SRA Watchtower sat down with Phil to discuss regulations around third-party risk management and how the newly issued Guide for Community Banks, released in May of 2024 can be leveraged. Let's dive into the following three key themes summarized from this interview: 1) continuous adaptation, 2) the importance of regulatory guidance and best practices, and 3) the need for collaboration and communication. Listen or watch to the full episode below:

Continuous Adaptation

The FinTech industry is characterized by rapid innovation and changing market dynamics. As Phil Goldfeder highlights in the podcast, continuous adaptation is essential for both industry players and regulatory bodies. Learning from past experiences and embracing change are crucial to staying relevant and resilient amidst evolving trends and technologies. By remaining agile and proactive, FinTech companies can navigate regulatory challenges more effectively and seize opportunities for growth and innovation.

Phil touches on the importance of adaptation and continuous innovation by noting many technology companies are creating access to financial services for the consumer. Witnessing his own experiences with his children, he points out that the majority of people today consume their financial services by only using their phone, whether it be an app or technology based program. By partnering with FinTechs, financial institutions can meet the consumer where they are much easier.

Importance of Regulatory Guidance & Best Practices

Regulatory guidance serves as a roadmap for FinTechs and traditional banks alike, providing clarity and consistency in navigating complex regulatory frameworks. Phil emphasizes the significance of establishing clear regulatory standards and best practices to ensure compliance and mitigate risks associated with FinTech innovation. By adhering to these standards, companies can build trust with regulators, investors, and consumers, fostering a safer and more resilient financial ecosystem.

“Financial technology is evolving very very quickly, and we need our regulators to evolve at the same pace” - Phil Goldfeder, CEO, American Fintech Council (AFC)

The most recent Regulatory Guide will be a great tool for banks as they enter and explore third-party relationships, but it is still not exhaustive. In addition to the new guide book, Phil also recommends looking at a mix of consent orders from your peers and talking to banks operating in similar spaces as your own to gain different perspectives.

Need for Collaboration and Communication

Proactive collaboration and communication between industry stakeholders and regulatory bodies are essential for addressing regulatory challenges and promoting best practices in risk management. Phil Goldfeder and Ed Vincent underscore the importance of open dialogue and knowledge-sharing initiatives to foster a culture of compliance and transparency. By working together, stakeholders can identify emerging risks, share insights, and develop innovative solutions that benefit both consumers and the industry as a whole.

“The more you communicate, the more you collaborate, the more you’re able to work through what the questions are, what the concerns are and more importantly, the best way to address them to ensure a safe consumer experience” - Phil Goldfeder, CEO, American Fintech Council (AFC)

Phil especially believes that banks should be speaking with regulators more often than the once-per-year check-in that is most common. Recent conversations he’s had with regulators indicate that regulators are on the same page – they’d prefer to start having monthly or more frequent dialogue, so at the end of the year, it’s not a massive list to check.

From this discussion, Ed helped summarize Phil's advice with this check list:

1. Read Consent Orders
2. Read the Regulatory Guides
3. Talk to peers going through regulatory actions
4. Talk with regulators more consistently
5. COMMUNICATE, COMMUNICATE, COMMUNICATE

In conclusion, navigating FinTech regulation requires a multifaceted approach that includes continuous adaptation, adherence to regulatory guidance and best practices, and active collaboration and communication among stakeholders. By embracing these principles, FinTechs and banks who want to continue to work with FinTechs can thrive in an ever-changing regulatory landscape and drive positive outcomes for the industry and consumers alike.