Federal Reserve Board Governor Lael Brainard described some of the unique challenges FinTech poses for the highly regulated financial sector. At a conference hosted by the Northwestern University Kellogg School of Management, Ms. Brainard considered questions presented by the integration of new technology into the decades-old systems currently used by banks. Ms. Brainard argued that greater attention should be paid to banking regulations that ensure that the customer is protected from loss and shielded from fraud.
Ms. Brainard opined that the Board of Governors of the Federal Reserve will have to strike a balance between allowing "socially beneficial innovations to flourish" and ensuring that institutions "are operated safely and soundly and that they comply with applicable statutes and regulation." She acknowledged that to accomplish this, the agency likely will need to evaluate current vendor risk management guidance and "periodically assess whether and how authority under the Bank Service Company Act might pertain to developments in the fast evolving FinTech sector." Further, Ms. Brainard noted that some banks have chosen to develop their own application programming interfaces ("APIs") for developers to use, while others work with specialized "data aggregators," or companies that collect data from banks and create their own APIs to offer developers. Ms. Brainard asserted that banks remain concerned about being able to determine and control which companies have access to sensitive material.
Ms. Brainard questioned whether the plan proposed by the Office of the Comptroller of the Currency to offer FinTech companies "special purpose national bank charters" would result in further difficulties for the Federal Reserve. One such challenge might be determining whether companies receiving a charter would have access to Federal Reserve accounts and services. Ms. Brainard noted that the availability of these special charters could alter the FinTech landscape by allowing certain companies to circumvent the current necessity of connecting with a bank.
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