The OCC Challenges Fintech Sector to Address Inclusion

When the Office of the Comptroller of the Currency announced last week it would consider special purpose charter applications from financial technology (fintech) companies, the sector took notice. The long-awaited and much-covered move would license fintech lenders to operate nationwide. In addition, the OCC took a stance on issues like the development of a U.S. fintech sandbox and data security standards. 

Innovation requires inclusion

Tucked amid the OCC’s 200-page fintech licensing manual supplement is a small but powerful word: inclusion. To qualify for a charter, firms will have to commit to financial inclusion. This is a big deal for an industry that has delivered innovation within some fairly narrow parameters.

For the last 10 years, we’ve seen welcome innovation in fintech, including features like mobile checking and the ability to make payments with a single tap. But these moves are about efficiency: they make existing products faster and easier to use. They are not addressing new problems for new people. 

The 20th century reality

Almost 20 percent of Americans are underbanked, but today’s financial services aren’t addressing this problem. U.S. financial products are still based on mid-20th-century concepts. As a result, they primarily aim to serve the needs of wealthy white men. The sector needs innovation that designs new products for new audiences. Alas, many fintech firms instead pursue improvements on what already exists. For one example, see the recent flurry of interest in fintech debit cards.

There are positive signs out there. Betterment, a Bateman Group client, has made affordable and automated investments available to all. Another of our clients, Anthemis, is actively investing in companies that promote financial wellness. There are also pioneers like Fabric, which designs insurance for families rather than individuals, and Better, an online lender trying to bring homeownership to millennials. But there is still so much more to do. The industry can and should do more when it comes to innovation.

What’s next

The future of federal fintech regulation is still unclear, and state regulators aren’t going to accept federal overlordship without a fight. Plus, there is no consensus on how to define inclusion for the sector. Still, if this report can start a meaningful conversation on how the industry innovates to expand financial inclusion, the OCC will already have given fintech a useful nudge.