What’s New at the OCC

In 2015, the Office of the Comptroller of the Currency (OCC) expanded its involvement with financial-services innovation, making innovation a key area of focus. In a recent interview, Beth Knickerbocker, the OCC’s inaugural chief innovation officer, said, “The OCC is saying that it’s okay to innovate responsibly.” And although she said that “[a]t the OCC, we are neutral about the use of any particular technology, our concern is how it is applied and monitored,” it is clear that she and Kathleen Oldenborg, director for payments risk policy, are keen to see U.S. banks staying current with new technologies.

Specific banking technologies the OCC’s new Office of Innovation is interested in include distributed-ledger technology for back-office operations, mobile’s evolution as a delivery channel, and such intriguing ideas as artificial intelligence for managing a bank’s portfolio of loans.

In keeping with its role and mandate, the OCC won’t become an operator of new technology. Rather, the commitment is to support responsible innovation, as demonstrated by the appointment of innovation officers in Washington, D.C., New York City, and San Francisco. The Office recently held an outreach event in San Francisco called “Office Hours,” where it conducted one-to-one meetings with fintechs and others. Once the Office is fully operational, it will have similar events in Washington and New York.

The OCC continues to focus on new technology’s impact on the banking system and on offering support to banks and information-technology companies on responsibly interacting in a federally regulated industry. One well-thought-out approach is the OCC’s emphasis on encouraging banks to think strategically about using new technology, monitoring and assisting where needs are seen, and assisting banks in educating their customers about the financial-technology revolution that’s going on in the U.S. market.

When I asked about what the OCC’s Office of Innovation sees as the main feedstocks for innovation, replies included: the emergence of cross-industry opportunities, the evolving needs of customers, and the increased efficiencies available through embedded technologies like application programming interfaces.

Emphasizing the OCC’s interest in improving access to financial services for the underbanked, the observation was made that mobile-phone technology, one of the most effective technologies for serving this segment, has been taken up by this community more rapidly than among the public as a whole. Other options for serving the underbanked include banking units inside stores and pop-up branches. The OCC observes that people having access to these kinds of community-oriented, bank-based payments services has been shown to increase access to lending services, especially where they include non-traditional types of data for credit evaluation.

Internally, the OCC is looking at its own training and awareness programs to give OCC staff who call on banks the understanding and skills needed to effectively analyze new technologies when onsite at a bank. In addition to training for examiners and other staff in new financial technologies, the agency is considering the idea of having more technologists on staff, as well.

As our interview was drawing to a close, I asked Beth and Kathy to picture a grid with Payments/Lending on one axis and Retail/Commercial on the other, and indicate in which quadrant they expect we will see the most meaningful innovation. Their answers were thought-provoking: “It’s not only in each quadrant, it is in the interfaces among the quadrants” and “innovation in banking is a field with many flowers. Some are annuals, some are perennials.”

There’s a lot happening in the field of new payments technology. It’s clear that the OCC is doing more than just staying in touch with it.

Conference Preview

I’m leading a panel on “Should Fintech Be Regulated?” with U.S. Bank’s Douglas Nielson, senior vice president for  innovation research and development, and an innovation leader from Carneros Bay, at BAI Beacon October 3-5, 2017. in Atlanta. Hope to see Digital Transactions readers there!

—George Warfel • GWarfel@haddonhillgroup.com