OCC highlights growing competition for banks with new fintech entrants

The U.S. Office of the Comptroller of the Currency (OCC) has released a report that discussed the risks facing national banks and federal savings, stating that the emerging fintech companies poses competition to US banks that are unable to compete with this developing field.

The report titled ‘OCC Semiannual Risk Perspective for Fall 2016’ is a semi-annual report into risks to the banking system.

“Strategic risk remains high as banks consider business model changes and face challenges in growing revenue. Strategic planning remains important as banks adopt innovative products, services, and processes in response to the evolving demands for financial services and the entrance of new competitors, like fintech companies,” the report highlights stated.

Apart from fintech firms, the OCC report also states the increasing operational risks and threats that are facing banks as a result of ‘changing cyber security threats’ and ‘increased reliance on third party relationships’. Also, banks face challenges meeting the integrated mortgage disclosure requirements and amended Military Lending Act regulatory requirements.

Earlier in December, OCC announced that it is creating a new chartering system for fintech startups that will bring them into the limelight of a federally regulated banking system, thus allowing them to operate across state lines. This move has given concern from a number of incumbent US banks that they will be competitively disadvantaged, Finextra reported.

The OCC report covers risks facing national banks and federal savings associations and presents data in four main areas: the operating environment, bank performance, trends in key risks, and regulatory actions. The report focuses on issues that pose threats to the safety and soundness of those financial institutions regulated by the OCC.