Independent Banker - November 2023 - 37

Even so, having " book knowledge "
isn't the same as firsthand experience.
" They [typically] haven't sat through
a regulatory exam or worked through
an MRA through the oversight of the
OCC, " emphasizes David Robinson,
director of fintech partnerships for
Dickinson Financial Corporation,
which owns $2.5 billion-asset
Academy Bank in Kansas City, Mo.,
and $1.3 billion-asset Armed Forces
Bank in Fort Leavenworth, Kan.
" That's a very different thing from
knowing banking. "
Keeping fintechs compliant
As bank technology gains greater
capabilities, it creates more complex
compliance issues. For example, AI
introduces incredible efficiency, but
it may also introduce unfair bias
in decisions.
" It's a big concern, " says Charles
Potts, executive vice president and
chief innovation officer of ICBA. " The
consistency and accuracy of data
that's analyzed has to be thought
about, especially if you're going to be
using these types of tools to calculate
risk or credit decisions. "
In the end, whatever the technology
being used, humans must exercise
oversight of the tools, and that's where
agencies will hold banks accountable.
" You can't have a black box
process, " Potts explains. " There
needs to be transparency in how the
technology helps make decisions.
You have to explain to everybody,
including the customer and the
regulatory agencies, how you
arrived at your decisions. Models
that are put around AI tools have to
be explainable. "
He urges community banks to keep
regulators abreast of their plans.
" It's considered a best practice that
as a community bank is developing
or rolling out a new technology, [it
should] keep the principal regulatory
agencies informed of what it's doing, "
says Potts. " That's especially true
where these initiatives may have some
customer or market-facing aspect
to them. "
Foulks has found that regulators
can provide a good sounding
board to banks considering fintech
partnerships. " Regulators are happy
to talk to you outside of your exam
cycle, " she says. " You can get their
input on a fintech partner. "
She adds that the FDIC's SR 13-19
letter, " Guidance on managing
outsourcing risk, " published in
August 2021, provides a good basic
framework for banks' responsibilities
regarding third-party vendors.
Building trust in fintech
ICBA's ThinkTECH Accelerator
has taken the lead in educating
potential fintech partners. While
participating in the program, fintech
representatives meet with regulatory
agencies that provide feedback on
potential compliance issues of their
solution. In addition to vetting fintech
startups with regulatory feedback,
the accelerator brings in accounting
firms, law firms and compliance
specialists to provide collaborative
feedback to the fintechs. " That's a
robust ecosystem of subject matter
experts that can help assess potential
partners, " Potts says.
Given that banks bear ultimate
responsibility for their customers'
data, it's imperative that executives
conduct thorough investigations of
potential partners. Foulks says First
Utah scrutinizes potential fintech
partners as carefully as it does its
own departments.
" That vendor may just be selling
us a piece of software and customer
support, " she says. " They aren't
owning the customers and may be
expecting us to run things on the
back end. For that reason, you need
to understand this as well as if you
created them yourself. "
Foulks stresses that banks should
know where the data lives at a
fintech's location and who has access
to it. " All of those confidential data
issues are front and center, " she
says, adding that banks must insist
on the access they need to meet
compliance obligations.
" Whatever the product is, " she says,
" do they have the mechanisms built
in to keep us compliant, to be able to
make the right disclosures at the right
time and do we have the ability to
utilize the data in the way we need to,
to stay compliant? "
Bankers frequently seek
recommendations from other bankers
as to trustworthy and effective fintechs.
Andrew Tinberg, president and CEO
of $1.6 billion-asset CNB Bank &
" Whether you're striving for
operational excellence or to
take the customer experience
to the next level, innovation
is the bank's pathway to
long-term success. "
-ANDREW TINBERG, CNB BANK & TRUST
independentbanker.org // 37
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Independent Banker - November 2023

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