Season 2 | Ep. 46: Strengthening Bank-FinTech Partnerships - Phil Goldfeder, CEO, AFC

The latest episode of the Risk Intel Podcast, Phil Goldfeder, CEO of the American Fintech Council (AFC) joined host Ed Vincent to delve into the evolving relationship between banks and fintech firms. Ed and Phil connect on the latest comment letter the AFC submitted in response to the joint Request for Information on Bank-Fintech Arrangements Involving Banking Products and Services Distributed to Consumers and Businesses (RFI) by the Board of Governors of the Federal Reserve (FRB or Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) collectively referred to as the “Joint Agencies”.

Listen to the full episode below or read the summarized version, as Phil and Ed discuss the best practices and key takeaways from this RFI by the Joint Agencies.

Modernizing the Regulatory Framework

Phil begins by addressing the need for a regulatory framework that keeps pace with the growth and complexity of bank-fintech partnerships. The current system, largely designed for traditional banking, does not fully accommodate the unique structures and operational dynamics of today’s FinTech collaborations. To foster efficient partnerships, he advocates for consistent standards and oversight that encourage innovation without compromising security. This updated approach would enable banks and FinTechs to work together more effectively, creating a more adaptive, resilient financial ecosystem.

Improving Examiner Education

Another critical area of focus is the education of financial examiners who oversee these collaborations. Phil argues that examiners need specialized knowledge of FinTech’s technological and operational nuances. An updated understanding of these areas would improve the quality and relevance of examinations, ensuring that they better reflect the distinct characteristics and challenges inherent in FinTech collaborations. Enhanced examiner education would help create a more balanced regulatory environment that aligns with the diverse nature of bank-fintech partnerships.

“The AFC believes in ensuring examiners are as well-versed in FinTech as they are in traditional banking. It’s essential for relevant, impactful exams that reflect the actual operations of these partnerships” - Phil Goldfeder, CEO of the American Fintech Council (AFC)

Supporting Innovation through System Modernization

Phil further emphasizes the importance of modernizing regulatory systems to support ongoing technological advancement. Traditional regulatory processes can unintentionally slow down innovation, creating barriers for fintech firms and limiting the potential benefits of their technology. By streamlining outdated systems and embracing technology-forward policies, regulators can better support fintech’s role in the market, allowing new, consumer-friendly financial solutions to flourish. This modernization aligns with the AFC’s broader goal of ensuring that regulatory practices are not only current but also flexible enough to adapt to future changes.

Establishing Standardized Risk Management

Effective risk management is a cornerstone of any successful bank-fintech partnership. The AFC advocates for standardized risk management practices to ensure safe, sustainable collaborations between these entities. A uniform approach to risk management would allow both Banks and FinTech companies to operate under clear, consistent guidelines, reducing uncertainties and promoting trust within the industry. This approach provides a safeguard against potential pitfalls while empowering institutions to engage in meaningful partnerships that benefit both parties and, ultimately, the consumers they serve.

Promoting Responsible Innovation and Consumer Protection

Phil also stresses the importance of a “consumer-first” mindset as FinTechs and technology in general continues to transform the financial services industry. Responsible innovation involves developing technologies and solutions that prioritize the consumer’s best interests. For the AFC, consumer protection is integral to the FinTech industry’s growth, ensuring that new services do not sacrifice ethical standards or customer security. By fostering a culture of accountability and proactive risk management practices, the AFC aims to support sustainable innovation that enhances the consumer experience while upholding ethical standards.

Collaboration for a Unified Approach

The episode underscores the value of collaboration among FinTech firms, banks, and regulators in building a sustainable regulatory framework. The AFC actively works to bridge gaps across these sectors, advocating for policies that foster cooperative approaches to address industry challenges. This united effort is essential for adapting to the fast-paced changes in financial technology, ensuring that regulations, partnerships, and innovations align with the long-term health of the industry.

Conclusion

This discussion sheds light on the regulatory shifts needed to support the future of bank-fintech partnerships. By modernizing frameworks, investing in examiner education, and standardizing risk management practices, the financial services industry can encourage responsible innovation while safeguarding consumer interests. These measures will foster a supportive environment where both FinTechs and Banks can thrive within a well-balanced regulatory landscape.

Learn about the AFC's mission and recent letter regarding the future of bank-fintech partnerships.

You can also find SRA Watchtower and Ed Vincent at the upcoming AFC Policy Summit 2024 - please contact us if you would like to schedule a meeting or be sure to attend Ed's panel session speaking on "Regulatory Modernization: At Pace With Consumer Financial Innovation at 9:55AM.