Reshaping the FDIC Through Innovation and Technology

When you hear the words inclusion and resilience, do you think about the future of banking? According to this episode of The Yield, you should. Peter Kerr, CFA sits down with Sultan Meghji, Chief Innovation Officer at the Federal Deposit Insurance Corporation (FDIC) to discuss the future of the Financial Sector.  Prior to joining the FDIC, Sultan spent his entire career in technology. Now, his mission is to bring the innovations of the future to the FDIC to ensure U.S. Banks are run safely and soundly, as well as inclusively.

Key Takeaways:

[1:43] The 4 pillars in the mission of the Chief Innovation Officer at the FDIC illustrate that the future of banking is in very good hands.

[5:10] A high-level overview of the FDIC consumer mission and its relationship with the Federal Reserve.

[9:25] Increasing inclusion and serving the underbanked starts with removing the biases that put the underbanked at a disadvantage.

[13:08] Does banking consolidation have a negative impact on the underbanked? It might, depending on where you live.

[17:32] Fintechs and startups might like to bend tradition, but they’re still playing by the rules. Does this result in regulatory problems or just human problems?

[19:51] Resilience in the face of threats to consumer data is more essential than ever.

[23:20] Cyber security, climate change and the other problems that are keeping Sultan up at night.

[26:14] Challenges of transitioning from the speed of the private sector to the much slower public sector.

[31:17] What does the future of banking look like from within the FDIC?

[33:20] Different pathways consumers can take to avoid the biases that the FDIC is working to remove.

[38:00] Countries that are getting regulatory banking rights are inspiring change in the US.

[40:10] Sultan’s thoughts on NFTs and the exciting future of fintech.

Sultan, the Chief Innovation Officer at the FDIC highlights the four pillars that are guiding and governing everything that is happening under his leadership. From taking financial solution inclusion to levels that include all Americans to increasing resilience in the face of ransomware or state-based criminal activity, amplifying the level of banking that is done digitally and looking to the 50 year future of global banking, Sultan has a vision that is undoubtedly working to reshape the FDIC.

But how does this improved consumer vision fit in with the Federal Reserve’s banking regulations? Sultan compares the role of each and breaks down the two main ways that the FDIC works to protect the money in US banks, but also to run examinations on all of the banks to ensure that they are being run in thoughtful and safe ways.  And this doesn’t end at consumer protection. It extends to climate, cyber security, and a forward-thinking approach to the banking of the future.

You may be surprised to learn that millions of American households don’t have a bank account. The impact of having no way to deposit a paycheck or write out a rent check, let alone consider savings or investments, is huge for underbanked Americans. Sultan calls this the problem that keeps the FDIC up at night. He paints a picture of what life looks like for the underbanked, as well as the work that the FDIC is doing to remove biases and make banking more accessible for everyone. This means increasing technology, eliminating overextended contracts, and reducing the haves and have-nots when it comes to digital access to banking.

Fintechs and startups tend to bend tradition when it comes to laws and regulations, but they generally still aim to play by the rules. The greater concern, according to Sultan, is at the operational level, where the culture divide between older and younger users is only growing as banking moves more and more digital. But, Sultan says, this is not so much a regulatory problem as it is a human problem.

Resilience in the face of threats to consumer data is more essential than ever, as well as the ability to prepare for the massive, Y2K style overhaul that is going to happen to the computing system in the near future. According to Sultan, preparing for these changes and guarding against cyber attacks needs to be in the top three focus areas of every bank in America.

These are exciting and promising times for banking. The pace of the digital transformation is only picking up speed, and Sultan is working to bring the slower-paced federal agencies up to speed so that the next generation can operate with an even higher level of efficiency. Hopefully, this translates to fewer meetings and fewer filing cabinets for everyone. Overall, Sultan has an optimistic outlook for the future of banking. In the same spirit of inclusion and accessibility that you can find at Yieldstreet, he is working to make the possibilities of banking for a broader audience a reality for everyone.

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