Fintech

Regulators issue joint warning on banking and fintech risks

Published

9 months ago

26 July, 2024

Regulators issue joint warning on banking and fintech risks

In a joint statement, the Federal Deposit Insurance Corp., the Federal Reserve Board and the Office of the Comptroller of the Currency warned that end users could “reasonably” confuse certain “non-bank third parties” with FDIC-insured banks.

Bloomberg

WASHINGTON — Federal banking regulators on Thursday issued a joint warning and request for information about the potential risks of partnerships between banks and fintechs.

The joint statement, issued by the Federal Deposit Insurance Corp., the Federal Reserve Board and the Office of the Comptroller of the Currency, warned banks of the risks associated with relying on third parties, particularly for deposit-related services.

“A bank’s use of third parties to perform certain activities does not diminish its responsibility to comply with all applicable laws and regulations,” the statement read.

The joint statement notes that banks sometimes “rely on one or more third parties to manage the system for recording deposits and transactions,” “process payments,” “perform regulatory compliance functions,” “provide customer service,” and more.

Regulators have suggested that banks carefully vet third-party partners for trustworthiness and establish clear contracts that define the roles and responsibilities of each party. They also suggested that banks continuously monitor management information systems used by third parties and have contingency plans in place in the event of operational disruptions.

While the statement provides a roadmap for how banks might manage risk, it does not change existing regulations or supervisory expectations. The statement noted that relying on third parties to handle critical operations, including deposits, can generally weaken banks’ oversight of those functions and hinder their ability to monitor risk.

Fragmented recordkeeping among third parties could confuse banks’ understanding of outstanding obligations and delay depositors’ access to funds. The agencies also highlighted concerns about outsourcing compliance functions and the risk of failing to meet consumer protection obligations.

Additionally, the statement cited the risk that unclear third-party relationships could mislead consumers about the extent to which their funds are covered by FDIC deposit insurance, which generally does not apply to nonbanks.

“Certain non-bank third parties could be reasonably mistaken for insured depository institutions by end users, particularly when they reference FDIC deposit insurance in marketing and other public-facing materials,” the statement reads.

“End users may not be aware that access to their funds may be dependent on third parties and that deposit insurance does not protect against losses resulting from the failure of third parties.”

Regulators have been working to better understand partnerships between banks and fintechs, in particular in the wake of the bankruptcy of middleware vendor Synapse Financial in April.

That situation left tens of millions of dollars in consumer deposits frozenIt also led to more Regulatory oversight of banks in similar partnerships. In June, the Federal Reserve issued a cease-and-desist order against Synapse partner Evolve Bank relating to deficiencies in its anti-money laundering, risk management and consumer protection programmes.

Just a few weeks ago, FDIC Board members Jonathan McKernan and Rohit Chopra, the latter director of the Consumer Financial Protection Bureau, suggested that regulators consider issuing more specific guidance on third-party risks.

Thursday’s release provides some guidance for banks, but closely follows the agencies’ current policies. The banking agencies are also seeking input from the public and stakeholders about the risks involved in bank-fintech partnerships.

Federal Reserve Governor Michelle Bowman said Thursday that she welcomed the move to collect information, given the risks that third-party relationships can pose to consumers and the financial system.

“We have seen that these relationships can pose significant risks to banks and their customers, including retail deposit customers who reasonably expect their deposits to be insured and that their banking service provider will comply with all applicable laws, including consumer protection laws,” he said in prepared remarks. “It is important that the agencies fully understand the range of practices and different bank-fintech arrangements in the industry before issuing additional guidance.”

But Bowman, a former banker, also said she is generally skeptical of any attempt to impose new regulations on banks over these partnerships.

“I remain concerned both about the risk of driving innovation out of the regulated banking system and about the sheer volume of new guidance and rules for banks of all sizes,” she said. “My hope is that this RFI and the process that follows it do not lead to duplicative or contradictory guidance, or that unnecessarily constrain innovation in the banking system.”

Source

Up Next

“$100 million deals to close”

Don't Miss

US regulators seek insights into bank-fintech relationships

FinCrypto Staff

We are the editorial team of FinCrypto, where seriousness meets clarity in cryptocurrency analysis. With a robust team of finance and blockchain technology experts, we are dedicated to meticulously exploring complex crypto markets with detailed assessments and an unbiased approach. Our mission is to democratize access to knowledge of emerging financial technologies, ensuring they are understandable and accessible to all. In every article on FinCrypto, we strive to provide content that not only educates, but also empowers our readers, facilitating their integration into the financial digital age.

Click to comment

Fintech

Lloyds and Nationwide invest in Scottish fintech AI Aveni

Published

9 months ago

29 July, 2024

FinCrypto Staff

Lloyds and Nationwide invest in Scottish AI fintech Aveni

Lloyds Banking Group and Nationwide have joined an £11m Series A funding round in Scottish artificial intelligence fintech Aveni.

The investment is led by Puma Private Equity with additional participation from Par Equity.

Aveni creates AI products specifically designed to streamline workflows in the financial services industry by analyzing documents and meetings across a range of operational functions, with a focus on financial advisory services and consumer compliance.

The cash injection will help fund the development of a new product, FinLLM, a large-scale language model created specifically for the financial sector in partnership with Lloyds and Nationwide.

Joseph Twigg, CEO of Aveni, explains: “The financial services industry doesn’t need AI models that can quote Shakespeare, it needs AI models that offer transparency, trust and, most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, vetted by financial services experts for specific financial services use cases.

“FinLLM’s goal is to set a new standard for the controlled, responsible and ethical adoption of generative AI, outperforming all other generic models in our selected financial services use cases.”

Robin Scher, head of fintech investment at Lloyds Banking Group, says the development programme offers a “massive opportunity” for the financial services industry by streamlining operations and improving customer experience.

“We look forward to supporting Aveni’s growth as we invest in their vision of developing FinLLM together with partners. Our collaboration aims to establish Aveni as a forerunner in AI adoption in the industry, while maintaining a focus on responsible use and customer centricity,” he said.

Source

Fintech

Fairexpay: Risk consultancy White Matter Advisory acquires 90% stake in fintech Fairexpay

Published

9 months ago

29 July, 2024

FinCrypto Staff

Treasury Risk Consulting Firm White Matter Alert On Monday he announced the acquisition of a 90% stake in the fintech startup Fair payment for an undisclosed amount. The acquisition will help White Matter Advisory expand its portfolio in the area of cross-border remittance and fundraising services, a statement said. White Matter Advisory, which operates under the name SaveDesk (White Matter Advisory India Pvt Ltd), is engaged in the treasury risk advisory business. It oversees funds under management (FUM) totaling $8 billion, offering advisory services to a wide range of clients.

Improve your technology skills with high-value skills courses

College OfferCourseWebsite

IIT Delhi	Data Science and Machine Learning Certificate Program	Visit
Indian School of Economics	ISB Product Management	Visit
MIT xPRO	MIT Technology Leadership and Innovation	Visit

White Matter Advisory, based in Bangalore, helps companies navigate the complexities of treasury and risk management.

Fairexpay, authorised by the Reserve Bank of India (RBI) under Cohort 2 of the Liberalised Remittance Scheme (LRS) Regulatory Sandbox, boasts features such as best-in-class exchange rates, 24-hour processing times and full security compliance.

“With this acquisition, White Matter Advisory will leverage Fairexpay’s advanced technology platform and regulatory approvals to enhance its services to its clients,” the release reads.

The integration of Fairexpay’s capabilities should provide White Matter Advisory with a competitive advantage in the cross-border remittance and fundraising market, he added.

The release also states that by integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

Source

Fintech

Rakuten Delays FinTech Business Reorganization to 2025

Published

9 months ago

29 July, 2024

FinCrypto Staff

Rakuten (Japan:4755) has released an update.

Rakuten Group, Inc. and Rakuten Bank, Ltd. announced a delay in the reorganization of Rakuten’s FinTech Business, moving the target date from October 2024 to January 2025. The delay is to allow for a more comprehensive review, taking into account regulatory, shareholder interests and the group’s optimal structure for growth. There are no anticipated changes to Rakuten Bank’s reorganization objectives, structure or listing status outside of the revised timeline.

For more insights on JP:4755 stock, check out TipRanks Stock Analysis Page.

Source

Fintech

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

Published

9 months ago

29 July, 2024

FinCrypto Staff

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

You are reading Entrepreneur India, an international franchise of Entrepreneur Media.

White Matter Advisory, which operates under the name SaveDesk in India, has announced that it is acquiring a 90% stake in fintech startup Fairexpay for an undisclosed amount.

This strategic move aims to strengthen White Matter Advisory’s portfolio in cross-border remittance and fundraising services.

By integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

White Matter Advisory, known for its treasury risk advisory services, manages funds under management (FUM) totaling USD 8 billion.

Founded by Bhaskar Saravana, Saurabh Jain, Kranthi Reddy and Piuesh Daga, White Matter Advisory helps companies effectively manage the complexities of treasury and risk management.

The SaveDesk platform offering includes a SaaS-based FX market data platform with real-time feeds for over 100 currencies, bank cost optimization services, customized treasury risk management solutions, and compliance guidance for the Foreign Exchange Management Act (FEMA) and other trade regulations.

Fairexpay is a global aggregation platform offering competitive currency exchange rates from numerous exchange partners worldwide. Catering to both private and corporate customers, Fairexpay provides seamless money transfer solutions for education, travel and immigration, as well as simplifying cross-border payments via API and white-label solutions for businesses. Key features include competitive currency exchange rates, 24-hour processing times, extensive currency coverage of over 30 currencies in more than 200 countries, and secure, RBI-compliant transactions.

Source