Federal Reserve Board ("FRB") Governor Michelle W. Bowman highlighted proposals to modernize payment services for community banks.

In a speech at the 2020 Banking Outlook Conference, Ms. Bowman expressed support for (i) adopting an additional same-day window to the automated clearinghouse ("ACH"), which will allow banks outside of the eastern time zone to have more time for same-day ACH services, (ii) the planned implementation of the FedNow Service, which will provide community banks with a long-term solution to meeting the demand for faster payment services by their customers and (iii) encouraging community banks to partner with FinTech firms to offer checking accounts online.

Third-Party Service Providers

To help reduce the burden for community banks that rely on outside service providers for new technologies and payment services, Ms. Bowman recommended that the FRB:

  • provide guidance on how to conduct due diligence when searching for a third-party provider;
  • support partnerships between community banks and FinTech firms with successful track records;
  • allow banks that use the same third-party service provider to collaborate on resources in order to avoid duplicating each other's work;
  • issue consistent guidance on third-party relationships across all banking agencies and consider adopting the OCC's outsourcing guidance;
  • make FRB regulatory conduct exam results of third-party service providers available to all banks, rather than just to the banks that are already clients of the service provider; and
  • tailor the expectations of community banks with assets under $1 billion based on their "size, risk, complexity, and capacity."

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