Letter to the OCC on the RFI regarding Community Bank Digitalization

Dear Acting Principal Deputy Chief Counsel Feldstein:

The American Bankers Association is pleased to comment on the Request for Information (RFI) Regarding Community Bank Digitalization issued by the Office of the Comptroller of the Currency (OCC). The RFI is seeking input on community bank engagement with digitalization, including the key challenges and barriers faced by community banks in the adoption and implementation of digital banking solutions. We appreciate the RFI and encourage the OCC to continue to seek input from banks and other stakeholders as digitalization and technology evolves.

The RFI defines digitalization as "the use of technology to change a business model, provide new revenue and value-producing opportunities, or automate business processes." The definition indicates that the OCC intends the RFI to include any use of technology to make improvements at a community bank. Applying this broad definition, ABA's comment will focus on the current challenges community banks face regarding adoption of new and emerging technologies in the retail customer banking space.

Summary of Content

Community banks are significant drivers of the American economy. These institutions account for the vast majority of banks in the country, and they play a major role providing critical financial services to both individual and business customers. They are the biggest lenders to America's agricultural community, and as small businesses themselves, they are particularly active in small business lending. They employ more than 450,000 people and make up 42% of the bank branches in the U.S.

Today, community banks face a unique set of challenges, including nonbank competition, talent recruitment, and sustaining a beneficial relationship with core technology providers ("cores"). New and emerging technologies can both be the driver of these challenges and serve as important tools for community banks to remain competitive, meet customer demand, increase revenue, and improve efficiency. In most cases, community banks must rely on external parties, including their cores and fintechs, to provide new technology and support innovation because they do not have the resources or internal expertise to develop these technologies independently.

In Section I, we discuss how community banks are working towards digitalization and the challenges they face.

Download the comment letter to read the full text.