A decade that began with the banking industry in the midst of the financial crisis will close with the arrival of technology innovations that have transformed bank operations and consumer expectations. 

How banks might respond to the next economic downturn and the future of fintech? Former U.S. Comptroller of the Currency Thomas Curry, now a partner at the law firm Nutter, spoke with Banker & Tradesman about how these issues could play out in 2020 and beyond. 

Fintech innovations will likely remain the biggest strategic issue for banks of all sizes, Curry said. Obtaining financial technology at reasonable costs, working with viable fintechs and ensuring strong cybersecurity measures are some concerns banks will continue to face.  

From transactions to financial and wealth management tools, fintech apps have created positive change, Curry said, with banks’ consumers demanding the latest digital technology for personal and business uses. 

“Technology and the new and creative opportunities and vehicles for providing financial services and products to individuals and companies have really been phenomenal in the last couple of years,” Curry said. “Some of it has also opened up the door to more opportunities for unbanked and underbanked individuals to enter into the economic mainstream.” 

The rise of fintech has helped people who previously had limited or no access to banking products become eligible for credit. Curry expects to see ongoing public policy benefits as fintechs develop alternative underwriting systems, as long as the results are not biased, he added. 

“Technology and the new and creative opportunities and vehicles for providing financial services and products to individuals and companies have really been phenomenal in the last couple of years. Some of it has also opened up the door to more opportunities for unbanked and underbanked individuals to enter into the economic mainstream.”
— Thomas Curry, partner, Nutter 

Another way fintech could offer a public policy benefit is by continuing to develop better access to remittances, Curry said. Fintechs have opportunities to develop technology that will allow relatives to send funds to other countries through more accessible, more secure and less expensive options. 

Another option for remittances that could develop in coming years is the stablecoin, including Facebook’s proposed Libra. 

How Libra and stablecoins – a form of cryptocurrency with limited volatility – could progress is unknown, Curry said. Central bankers in both the U.S. and Europe have voiced concerns about stablecoins and their financial stability. Legislators have expressed doubts as well. 

If Facebook or other firms end up launching these currencies, the banking industry would have to face another kind of competition. 

“It really has some significant ramifications to competition: nonbanks and fintechs versus traditional banks and large banks,” Curry said. 

Will Nonbanks Get Charters? 

Nonbanks obtaining banking charters is another likely issue that Curry sees affecting the industry in the coming years.  

China already allows nonbank financial institutions, but U.S. firms face regulatory hurdles that limit which ones can obtain bank charters and own licenses, impacting both small fintechs and large technology companies.  

The court system could have some say in what happens with banking charters. As comptroller, Curry proposed the OCC limited–purpose charter for fintech companies that don’t hold deposits.  

The New York State Department of Financial Services and the nationwide Conference of State Bank Supervisors challenged the limited-purpose charter in court. A federal judge ruled in October that the OCC did not have the authority to issue national fintech charters. 

The OCC has appealed the court’s decision. 

Diane McLauglin

Firms could pursue other ways to enter banking, Curry said. One option for some fintechs is to obtain an industrial loan company charter offered in the state of Utah. Fintech firms could also look at an FDIC-insured, full-service banking charter, which requires extensive vetting and scrutiny of ownership, minimum capitalization, competency of the management and other considerations. 

A decade after Dodd-Frank reforms were enacted, most of the required regulations have been implemented, Curry said, with some rules being fine-tuned. After its extended economic expansion, the economy could slow down in the coming years, testing the effectiveness of new safeguards, like increased capital liquidity. 

“We’ve had a fairly benign economic environment for banks,” Curry said. “The test going forward will be how well the banks respond to adverse economic forces.”