FDIC’s McWilliams: Core banking vendors must evolve
Federal Deposit Insurance Corporation (FDIC) chair Jelena McWilliams says that banks and technology providers both need to evolve if they are to meet the changing needs of consumers.
In a speech at the Federal Reserve Bank of St. Louis, McWilliams says that the adoption of mobile banking has been a “great start” but that room to grow remains, especially when it comes to the development of core infrastructure.
“Existing core processing systems typically provide a number of different platforms for lending and deposit-taking activities,” she adds. “These platforms may use differing data standards and may not interact with one another, let alone solutions from other companies.”
McWilliams states that next-generation core service providers should be offering end-to-end digital banking experiences to their partners.
“These future core providers will develop their own innovative solutions for their financial institution clients. But they will also allow institutions to develop their own technology or partner with fintechs – all while providing flexible access to the data on the core provider’s systems.”
It’s easy for people to tell banks that if they do not innovate, they will lose market share, adds McWilliams.
“Banks know that. The cost to innovate is in many cases prohibitively high for community banks. They often lack the expertise, the information technology, and research and development budgets to independently develop and deploy their own technology.”
For the FDIC chair, the business case for collaboration is clear. “Fintech firms are built on a digital infrastructure that can develop and offer consumer products quickly and with requisite agility as consumer demand evolves,” she says.
“Banks have a built-in customer base, an understanding of regulatory requirements, access to the payment system, and deposit insurance.”
The FDIC launched its own tech lab – FdiTech – in September, and McWilliams believes that the regulator can help facilitate the development of collaborative technologies between banks and fintechs.
“We can reduce the regulatory cost to banks of developing and implementing new technology,” she says.
“It is our job as a regulatory agency to understand technology by engaging with innovators in banks and at fintechs and to provide sound guidance and technical assistance to banks that choose to deploy new technology.”
Her goal is not to replace the business judgement of banks, but “to identify and eliminate unnecessary regulatory burdens that discourages innovation.”