OCC studying risks posed by bank-fintech partnerships

The Office of the Comptroller of the Currency (OCC) is analyzing the complex array of arrangements between banks and financial technology companies (fintechs), as a step toward addressing the vulnerability to the banking system these relationships pose.

Banks benefit from partnerships with fintechs by getting access to tech innovation at a lower cost, while the latter benefits from affiliating with institutions with “trustworthy (reputations), long-standing customer bases, and access to cheaper capital and funding sources,” Acting Comptroller of the Currency Michael Hsu said in a speech at an industry event Wednesday.

But bank-fintech partnerships have grown “at exponential rates” and become so complicated it is often difficult to distinguish “where the bank stops and where the tech firm starts,” leaving the banking system vulnerable, Hsu said.