FDIC Chair Jelena McWilliams urged regulators and industry innovators to work together to "increase the velocity of transformation" to ensure that "banks are safe and sound and consumers sufficiently protected."

In remarks delivered at the FinTech and the New Financial Landscape Conference, Ms. McWilliams underscored that innovation is expanding bank access to more customers, and that new technology has enhanced "customer experience, [lowered] transaction costs, and increase[d] credit availability." However, she cautioned, millions of U.S. households do not experience these technological benefits because they are "unbanked" or "underbanked." According to Ms. McWilliams, "It will be up to institutions to leverage technology and develop products to reach these consumers."

Ms. McWilliams predicted that advancements in technology and data analytics will substantially impact banking itself in four principal ways:

  • data analytics will upgrade lending, and help banks to develop new methods to evaluate credit risk;
  • technology will change how banks identify customers and differentiate routine transactions from "suspicious activity";
  • artificial intelligence and machine learning will present new opportunities for managing risk; and
  • advancements will change the way in which the FDIC and other regulators tackle oversight, including in the areas of anti-money laundering compliance and consumer privacy.

Ms. McWilliams called on the FDIC to increase its collaboration and partnership with the industry to avoid playing "catch-up" with technological advancements.

Commentary / Steven Lofchie

FDIC Chair McWilliams' statement that banks have an obligation to use technology to reach underbanked consumers follows on a statement by FRB Governor Brainard that banks using artificial intelligence to make credit decisions must assure themselves that the use of AI does not have a discriminatory impact on disadvantaged groups. Banks should be aware that making decisions completely on the basis of the numbers may subject them to public criticism or reputational risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.