put money) and what a customer wants (the ability to borrow
money they currently do not have). With the advent of techno-
logical innovation in the financial realm, there is now another
process by which financial products are evolving. Dreams are
paving the way of innovation. Entrepreneurs are taking a look at
the current financial landscape and realizing that things can be
done in a completely different way. There has been a transition
away from the thought process of “I wish my bank could do…”
to “why can’t my bank do…”
Ideas and products typically develop for two reasons: 1) a need
exists that is not currently being met; or 2) opportunities exist to
enhance a product that is not fully meeting the needs of its users.
When one of those factors exists, the question needs to be asked,
“what can be done or what can be done differently?” When that
question is posed, it’s time to look at the potential for bringing a
new product to market.
Once the idea manifests itself, the real work must
■ ■ ■ Does this product currently exist?
• Is this a completely new product or is it an enhancement of an existing product?
• If it is a currently existing product, is it something
that we can make a significantly better experience for
the customer? For example ridesharing vs. traditional
taxi cabs. From a compliance perspective, this helps
us understand what regulations we must consider.
• If it is a completely new product, compliance of-
ficers must determine what regulations apply. It’s
best to run through the alphabet of rules to see which ones
you will want to consider. See regula-
tory framework below for more ques-
tions to ask.
■ ■ ■ Has this product been tried before?
• If so, what were the reasons it did not
work out previously?
• Do we have answers to solve for its previous failures?
• Can we learn from another company’s
mistakes, including through consent
orders and regulatory guidance?
■ ■ ■ Is there a market?
• Even if we can design the product and solve for past failures,
is there actually a market for the product?
• Is it something that would be easily adoptable by the public
or is there a steep curve for educating the public about the
• Who is the target market? Does it include potentially vulnerable customers?
■ ■ ■ What is the regulatory framework?
• What regulator, if any, would be concerned about this product? If you’re a bank, that’s an easy question to answer. If
you are working with a Fin Tech company, the answer may
not be so obvious.
• Do regulations address this type of a product?
• If so, what do the regulations allow?
• If not, what is the closest existing product to this idea and
how do the regulations address that product.
• Is this a completely “grey” space where the regulations would
be open to different interpretations of this product?
• If so, what are the pros and cons to creating and launching
this type of product?
• Based on the existing financial environment, what do we
think the perception of the regulators would be around this
■ ■ ■ What are the technical challenges associated with developing
• Can it be built?
• If so, can we create this completely in-house?
• If not, can we find a third-party vendor to work with on
outsourcing the work?
• Can it be maintained?
• Will this be done in-house?
• Do we need to rely on a third-party vendor?
• Can the necessary compliance controls be developed in a
cost effective manner?
Sometimes the idea will come up through the
ranks at the bank. Alternatively, it may have
been developed by a third party that wants to
partner with your bank to deliver it to consumers. Either way, the originators must be able
to prove to bank management that it not only
has a great idea, but also the means to carry it
out in a legal and compliant manner. This is
where the previous research truly comes into
play. There are two aspects compliance officers need to play a
role in compliance review and legal review.
This is really a two-step process if you’re a bank compliance team
looking to work with an outside Fin Tech company. Due diligence must
be conducted on the third-party provider in accordance with your
bank’s Third-Party Vendor Management program. Is the company
financially stable? Who is on their management team? What is the
company’s reputation? Is there anything that can be uncovered that
puts the bank in a bad position for working with the Fin Tech vendor?
Once that hurdle has been cleared (or if it’s an idea internal to
the bank), the next step follows. This is a period of due diligence in
which the bank compliance team will either create or review all of
The road to a successful
FinTech product launch is
long and demanding.