What Banks and Fintechs Need to Know About FDIC’s New Rules

These rules target accounts with features like prepaid cards and require banks to keep detailed information about who owns the money, including balances and account statuses. The goal is to make sure that if a bank fails, customers can access their money quickly. This proposal comes after recent fintech failures showed that poor recordkeeping can delay access to funds and reduce transparency.

Why the proposed rule?

Synapse, a fintech company, went bankrupt, revealing serious problems with how customer funds were tracked. Because of poor recordkeeping, many customers struggled to access their money quickly. The lack of clear, accurate data on who owned what funds showed how risky and confusing these fintech-bank setups could be. This incident pushed the FDIC to propose stricter rules, making sure that in the future, banks and fintechs keep better records to protect people’s money and ensure faster access during such failures.

What’s changing?

1. Enhanced Recordkeeping: Banks must keep precise data on the owners of funds within custodial accounts, ensuring that each depositor’s insurance coverage is clear and accurate.
2. Prompt Access to Funds: In the event of a bank failure, these rules will facilitate faster access to insured deposits by streamlining the process for the FDIC to identify and insure funds.
3. Increased Compliance Burden: Banks and fintech companies will need to invest in systems that can efficiently manage and update account information, adding a layer of operational complexity.

How This Impacts Companies?

The new rules will affect banks and fintech companies inseveral ways:

• Operational Complexity: Banks will need to adjust their recordkeeping processes to capture more granular details about each account holder, increasing administrative burdens.
• Regulatory Compliance Costs: Banks will need to accommodate increased investments in technology, training, and potentially additional staffing to manage increased data accuracy needs.
• Risk Management: Improved recordkeeping will help organizations better assess and manage the risks associated with custodial accounts, reducing the likelihood of mismanagement and fraud.

For fintech companies, these rules mean closer collaboration with their banking partners to ensure compliance and alignment of data standards. Failure to adapt could limit fintech access to banking services, affecting their ability to operate.

How can Document Transformation Solutions help with the new FDIC rules?

Managing all this data manually? That’s a nightmare. Traditional manual processes are not only slow but prone to errors, which could lead to compliance issues and operational inefficiencies. Document transformation and automation solutions are critical in addressing the challenges posed by these new requirements. Here’s where document automation solutions like Adlib can make a significant difference:

1. Automated Data Extraction: Adlib’s technology can automatically extract data from complex documents, including scanned records, PDFs, and legacy file formats, ensuring that all necessary information is captured accurately and updated in real time.
2. Enhanced Compliance Tracking: Automated solutions can standardize, tag and enrich documents with metadata, making it easier to track compliance with FDIC requirements and ensuring that all regulatory data is up to date and easily accessible.
3. Scalability and Efficiency: As the volume of data increases, manual processes struggle to keep up. Adlib’s scalable solutions can handle large datasets, processing and transforming documents at scale without compromising accuracy.
4. Audit Readiness: Automation helps maintain a consistent and reliable record, which is key for audits. With automated workflows, organizations can provide regulators with detailed, traceable information about account owners quickly and efficiently.

Adlib Use Cases in the Context of FDIC’s Proposed Rules

• Financial Institution Compliance: Large banks partnering with multiple fintech companies can use Adlib’s document transformation solution to streamline     recordkeeping for custodial accounts. By automating data extraction and document processing, the banks can improve their compliance posture, ensuring that all account information is accurate and accessible in case of regulatory scrutiny.
• Data Integration for Mergers: During a merger, banks often need to integrate data from multiple systems. Adlib’s solutions help by normalizing and transforming diverse documents into standardized formats, facilitating smoother transitions and maintaining compliance with regulatory requirements.
• Fraud Detection: Adlib’s solutions assist in fraud prevention by enabling more precise data analysis. By capturing and standardizing data from a variety of sources, banks can more easily identify discrepancies or signs of fraudulent activity within custodial accounts.

Conclusion

The FDIC’s proposed recordkeeping requirements are a major shift for banks and fintech companies. Document transformation solutions like Adlib can turn this challenge into an opportunity by helping organizations stay compliant, improve efficiency, reduce risks, and build customer trust. Automating data extraction and compliance tracking makes managing these changes easier, while also preparing companies for audits. As regulations continue to evolve, leveraging these technologies will be crucial for maintaining both a competitive edge and regulatory compliance in the financial sector.