The Federal Deposit Insurance Corporation (FDIC) released remarks from Chairman Martin J. Gruenberg at the Forum on the Use of Technology in the Business of Banking that took place yesterday, May 7th, in Arlington, Virginia. At the forum, banking experts and technology leaders in the industry gathered to discuss how emerging technologies will change banking operations, retail banking, consumer financial data access and more.
One of the emerging technologies that is disrupting the real estate industry, and is sure to affect banks, is blockchain and its connection to bitcoin. Blockchain is a series of computers, ranging from thousands to millions in number, which are able to simultaneously keep record of the same event or transaction in a ledger that is publicly viewable. It can be applied for any process that involves a transaction, record-keeping or agreement.
Blockchain technology is rising in popularity because it keeps sensitive information safe by encrypting records; every computer’s record provides a consensus of the validity of any transaction; and it allows two or more parties to engage in a transaction without the need of a middleman.
Chairman Martin J. Gruenberg commenced the forum with an introductory speech highlighting the importance of being proactive about how to adapt to emerging technologies that are changing the way banking professionals do business, and how they can be leveraged to improve bank operations, better serve consumers and small businesses, and promote economic inclusion.
The potential benefits technologies can offer banks and consumers include reduced transaction costs, increased operational efficiency, more access to mainstream banking, increased credit availability, consumer financial data access, and better customer service. A chief concern to the FDIC is economic inclusion as they hope to help more American households have complete participation in the nation’s economy.
“Just as graduating from school and getting a first job are milestones, a bank account, too, is a key step on the road to financial well-being,” states the FDIC Chairman. “Something as basic as an insured deposit account affords households the ability to safely deposit and store income, make payments toward monthly obligations such as rent or a mortgage, and engage in convenient daily transactions – such as buying groceries or more durable household goods.”
As well as preparing for the benefits of technological advancement, Gruenberg highlights the necessity for banks to prepare for the potential risks that come with incorporating technology into their operations. Risk management will require special attention to “cybersecurity, Bank Security Act and anti-money laundering concerns, consumer protection issues and privacy and data security risk areas,” Gruenberg states. Technological innovation has made it more difficult to protect consumer data and deposits, since protection must include not only physical protection but also virtual protection of their hard-earned resources. As a result, banks have to strengthen their information security programs and cybersecurity.
Banks will also have to make sure they can be sustainable in this new changing landscape to even the playing field with nonbank financial companies. One of these competitors will be bitcoin, an application of blockchain.
NAWRB is an active participant in conversations of how industries and organizations in the housing ecosystem can adapt to and utilize emerging technologies as a tool to accompany their traditional practices.
In real estate, blockchain is a helpful tool for ensuring secure transactions and data sharing, but it will not replace the power agents have in building meaningful relationships with their clients. Similarly, banks can utilize technology to help serve customers and businesses, while maintaining their role in common milestones for a household’s financial well-being.
Read FDIC Chairman Martin J. Gruenberg’s full speech here.