Once promising agency innovation office, FDITech, no longer fulfilling its potential; Responsible, innovative banks create access to critical financial services for families long forgotten by traditional institutions

AFC letter follows recent inquiry from leading Members of Congress expressing serious concerns with FDIC regulatory agenda pertaining to innovation in the financial services sector

Washington, D.C. (February 5, 2024) – The American Fintech Council (AFC), the premier industry association representing responsible fintech companies, including the largest innovative Banking-as-a-Service (BaaS) banks has requested that the Federal Deposit Insurance Corporation (FDIC) to consider its posture towards innovation in financial services and to pursue additional efforts to connect with responsible financial services companies creating access and equity in financial services.

“The FDIC should hold itself to the same level of transparency and communication that they expect from innovative banks and responsible fintech companies creating critical access and equity in financial services,” said Phil Goldfeder, Chief Executive Officer of AFC. “Agency engagement with industry is crucial to ensuring that pragmatic regulatory frameworks and effective oversight of the modern banking system. We have long advocated for a clear and consistent regulatory framework that reflects responsible industry developments and clarifies supervisory expectations for innovative financial services business models, products, and services.”

In a recent letter sent to Chairman Martin Gruenberg at the Federal Deposit Insurance Corporation, the AFC expressed disappointment with the lack of effective communication and industry engagement from the FDIC and offered to assist the agency understand innovative products and help bolster the financial resilience of the banking system and improve financial inclusion.

“FDIC’s establishment of its FDITech Office showed great promise for growing the agency’s understanding of innovative financial services offerings. AFC was initially encouraged by the development of the agency’s FDITech Office and the work it pursued during its first three years of operation,” wrote Ian P. Moloney, SVP, Head of Policy and Regulatory Affairs, in AFC’s recent letter to the FDIC.  “While we recognize that the agency has adjusted the aims of the FDITech Office… we believe that opportunities to effectively collaborate remain available with the various divisions and offices in the agency.”

The AFC effort follows a similar inquiry sent by House Financial Services Committee Chairman Patrick McHenry, and subcommittee chairs Andy Barr and French Hill, which also expressed concerns regarding the FDIC regulatory agenda pertaining to innovation. The members specifically inquired about the agenda and the impact it is having on the examination process. “We are also concerned that there is no publicly available information detailing how the FDIC’s posture on innovation will manifest in examinations and whether this change will be in compliance with the FDIC’s Compliance Examination Manual,” Wrote the Members of Congress in their letter to the FDIC. “We are concerned that the FDIC’s approach could, within the examination processes or otherwise, be used to prevent the development of innovative products and services that benefit consumers and businesses.”

“Many responsible companies comprising AFC’s membership have adjusted their business models and offerings, when necessary, to ensure they remain in compliance with regulatory requirements while continuing to serve consumers and expand financial inclusion,” continued Moloney in his letter. “By finding opportunities to effectively collaborate, we believe that the FDIC can join its fellow state and federal regulators in effectively attaining its innovation goals for both policy and examination staff so they can adequately understand and interpret the trends, consumer benefits, and risk profiles of regulated entities pursuing innovative business models, products, and services.”

Read full AFC letter here.