The Federal Deposit Insurance Corporation (FDIC) has taken steps to promote fintech partnerships and diversity and inclusion within the financial services industry, both internally at the FDIC and among the institutions it regulates, FDIC Chairwoman Jelena McWilliams said during the LendIt Fintech USA 2020 conference Wednesday.

McWilliams, an immigrant to the U.S. from the former Yugoslavia, said she has personal experience dealing with financial inclusion. “I think there’s a lot we can do here to build a system of inclusion and belonging, and we’re not there yet,” she said.

McWilliams spoke about key initiatives in the aftermath of widespread racial upheaval propelled by the deaths of George Floyd in Minneapolis and Breonna Taylor in Louisville, Ky., and the economic dislocation spurred by the coronavirus pandemic.

Here are six ways the FDIC is pushing its agenda to promote diversity and inclusion and fintech innovation:

Community banks

1. The FDIC has taken steps to encourage fintech partnerships and integrations among community banks to avoid the creation of banking deserts.

“When you think about the survivability of community banks … if they do not modernize their technology and offer solutions that technology companies, fintechs, bigger banks are able to offer, because there is rural depopulation … these small banks in the United States are going to be shrinking, consolidating and we’re going to have banking deserts if that trend continues,” McWilliams said.

As such, the regulator is looking to streamline the onboarding and vetting process that banks and fintechs require of third-party vendors. Those requirements, she added, tend to be almost identical because they are mainly driven by FDIC requirements. This has traditionally been burdensome for fintechs and costly, in terms of human capital, for banks, McWilliams said.

Charters

2. The FDIC has created a confidential filing process “more conducive to business practices,” and which should smooth out some wrinkles in the current depository insurance application process, which typically takes The FDIC months or years to approve. The new process allows fintechs applying for depository insurance to work with FDIC staff on the application and understand the process.

“For disruptors, for disruptor banks, for challenger banks, for fintechs, for technology companies that are thinking about this, the confidential filing process will allow them to get their feet wet without fully getting in the water,” McWilliams said. “Once they fully understand how we’re looking at these applications and what requirements are there, they can make the decision whether or not to proceed with the filing, which will then be public.” Once filed, the FDIC said it will respond within 128 days for rejection or approval.

Minority Depository Institutions

The FDIC is working to provide a path for the 149 Minority Depository Institutions to do more and have more financial security. MDIs are financial institutions in which at least 51% of voting stock is owned by minority individuals, or in which a majority of the board of directors is minority, and the community it serves is predominately minority. The regulator has taken the following steps:

3. The FDIC set up a fund for MDIs to receive capital from outside sources, McWilliams said. So far, the regulator has facilitated “a handful of commitments” from companies, most notably a $100 million investment by Microsoft for minority banks to help minority communities.

4. The FDIC tripled MDI representation in its community bank advisory committee so “those voices are heard and those perspectives are present,” McWilliams said. The regulator also created an MDI subcommittee to advise the regulator on its actions, to the extent it has unintended biases or blind spots in its regulatory actions and supervision.

Within the FDIC

5. The FDIC created an executive-level task force of diversity, which solely focuses on recruiting resources, hiring decisions, interview processes, as well as retention and advancement, especially of minorities, people of color and those traditionally underrepresented in the financial services and regulatory spheres.

6. The FDIC is also looking to hire a chief innovation officer, specifically one from a tech background, McWilliams said.

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