As Prepared for Delivery on November 8, 2022
Good morning! It’s my pleasure to join you for today’s fintech showcase for credit unions. I’ve seen a number of familiar faces here this morning, which I’m always happy to see. My role as a regulator demands a fairly extensive schedule of speaking engagements and public events, so it’s a relief to find myself talking to a group where we have some shared history.
That also means we can assume some shared knowledge. Over the last three years, I’ve spoken repeatedly on the promise of financial technology, and I’ve urged credit unions to look closely at fintech because these tools have the potential to revolutionize our approach to financial services. In fact, many of you in this room – maybe even most of you – have probably heard me discuss those issues.
So let me allay your anxieties right now: I’m not going to give that same speech today. At this point, we’re all on the same page with regard to the potential impact fintech will have on credit unions – otherwise, we wouldn’t be here.
But what I do want to talk about, at least briefly, is another issue that’s very much at the center of my agenda as a regulator, which is financial inclusion for underserved and marginalized communities. And more to the point, how a constructive working relationship between fintech providers and credit unions could be an incredibly powerful weapon in the effort to boost financial inclusion here in the United States as well as globally.
I’ve worked in or around the financial services industry for a long time, either in the private sector or in government service. I’ve served in a variety of roles in the industry, but one constant throughout my career has been a strong commitment to financial inclusion. In fact, when I was appointed the National Credit Union Administration (NCUA) as chairman in 2019, I left a position as corporate responsibility manager with JPMorgan Chase, a position in which a focus on financial inclusion was a top priority.
Since returning to the NCUA three and half years ago, I’ve continued those efforts. You might have heard me say that financial inclusion is “the civil rights challenge of our generation,” and I’ve urged financial services industry leaders to take up that challenge. And I don’t just mean paying lip service to the ideal or treating it as a “charitable” box to be checked or dropping in a few paragraphs on inclusion to fill out the back pages of an annual report. I’m talking about actively working to put financial inclusion at the center of the organizational mission.
Why? Well, one reason is that it’s the right thing to do. But it’s also good business. If we bring more of the under-served and marginalized into the legitimate financial services system, we create opportunity; we create jobs; we strengthen families and communities. And when we do that, it serves to create a need for financial services in a virtuous circle.
So, whether it’s helping people get access to affordable credit, promoting homeownership and small business entrepreneurship, or helping families to save for a college education or retirement, these are the tools of financial inclusion that can help people achieve greater independence, autonomy, and dignity in their lives.
Those are goals worth working toward, and credit unions, as cooperative finance entities with a longstanding commitment to the ethic of “people helping people,” are well-positioned to play a leading role in achieving those goals.
That’s a particularly urgent concern in today’s environment, as I think we all recognize. I try to be relatively measured in my assessments of the economic indicators. But I’ll admit that what we’re seeing out there now is deeply concerning: The highest rate of inflation in four decades, which is hitting household budgets hard and eroding wage gains for workers; rising interest rates; the very real threat of recession if we’re not already in one.
These interlocking dynamics represent a serious challenge to a great many of your members and their families. While we’ve made progress at expanding the circle of financial inclusion, I’m concerned we may lose ground if the economic conditions grow more foreboding.
While credit unions have been performing well even in this difficult environment, we should not take that success for granted, particularly given the fiercely competitive reality of today’s marketplace in financial services. It’s just an immensely challenging time.
But we also know that times of great challenge also tend to present great opportunities. And one reason I’ve been so interested in the nexus between fintech and credit unions is that I strongly believe that there is a tremendous opportunity for a constructive partnership here. That’s a partnership that could bring substantial business benefits for both fintech providers and credit unions while also helping to advance our financial inclusion priorities.
I know many fintech providers are seeking to have a positive social impact. And here again, this is an area where I believe credit unions and fintech providers can work together constructively, because that community-based mission of service and social impact is embedded in the very DNA of credit unions, unlike other financial services providers.
So, for all these reasons, I believe there is a strong incentive for credit unions and the fintech industry to work together in a constructive, forward-looking collaboration. Each side brings something valuable to the table: the cooperative finance movement, with its loyal membership base and a strong grounding in the ethics of community and inclusion, coupled with fintech’s innovative entrepreneurship, could be a very powerful way to address some of our most pressing challenges when it comes to combating inequality and narrowing the wealth gap.
So, I think this gives us a great opportunity, but as a regulator, I remind credit union leaders: do your due diligence. When you’re talking to these fintech providers, probe them on their commitment to financial inclusion to make sure that they share the industry’s ethic of service and social impact.
And probe them on other critical questions: Have they thought through the challenges related to data security and consumer privacy, and do they have adequate protections in place? Is what they’re pitching consonant with your institution’s existing compliance responsibilities under Know Your Customer and the Bank Secrecy Act requirements, as well as other pertinent regulations? Are the algorithms powering their products and services helping to promote equity and inclusion, or do they simply reinforce old biases?
These are all pertinent questions. Let’s really press these founders on the strengths and weaknesses of their products. Not to antagonize them but to ensure that they’ve taken into account the realities of what it means to work in the financial services space. They’ll probably welcome your forthright feedback, as it will help them to strengthen and improve their products and services.
And we want those products to be as good as possible because we have a tremendous opportunity here to develop innovative approaches to financial services that will, one hopes, provide affordable alternatives to the scourge of predatory lenders. We need innovative approaches to financial services that will shore up the cooperative finance movement for the future. And, to return to my original point, we need innovative approaches to financial services to enhance our efforts at more widespread financial inclusion by nurturing an ecosystem that will help people to achieve financial independence and will close the wealth gap.
In fact, my understanding is that the four presenters today have all articulated a commitment to financial inclusion as a fundamental part of their business models. There’s a quote from Steve Jobs I came across recently, in which he suggested that “The best way to create value in the 21st century is to connect creativity with technology.” Well, we’re going to see that argument in action this morning, and we’re all looking forward to seeing what these creative thinkers have developed.
I’ll remind everyone that, as a regulator, I’m not here to endorse any particular service provider or model. But I do hope that I’m able to learn something from their presentations that will help me to do my job more effectively, and maybe even more creatively.
But all of that is by way of introduction, and I would prefer to address some of these issues and any additional questions you all might have, in a more relaxed fashion, before we turn to this morning’s round of presentations. And if we don’t get to all of your questions here, I’ll be speaking in a couple of other sessions later today. And with that, I’ll turn things over to our moderator to guide our discussion.