How The OCC Will Help Bank Innovation

The OCC's Effort For Responsible Innovation

Given that our latest TV obsession is Westworld and that we are focused on innovation, it was with great interest last week that we learned that the OCC is prepping to open a “Responsible Innovation Office.”  This makes sense because not only do we need help with fintech, but someone needs to explain the time/space continuum, why there is a player piano in every episode and about a dozen of other plot points of the hit HBO series. Regardless of how up to date the OCC on Westworld, they are clearly trying to catch up to financial innovation as they also released a whitepaper (HERE). While some banks are concerned that the OCC formed this office so they could exert Westworld-Style “Delos Control” on banks, we take this at face value and assume that the OCC truly wants to assist banks. The OCC, like the management of Westworld, want banks to figure out “how to be the best version of themselves.” In this post, we look at the reasons and the objectives of the OCC and tell our view of why this is a material step forward.

OCC's Innovation Initiative


This project aims at creating a framework to assist banks and possibly financial technology (fintech) firms in creating more safe and sane innovation (not like Westworld). The creation of the Office of Innovation was the first step followed by establishing offices in New York, San Francisco, and Washington D.C. by early 2017.

The Office will be a coordinating entity for banks, fintech firms and regulatory bodies to share knowledge and develop consistent approaches to common problems. The OCC plans to conduct its own research and hopefully serve as a clearing center for the latest best practices such as the appropriate security measures for using third-party software connections (APIs).

OCC's Innovation Initiative

At present, a bank that wants to integrate a new one-to-many payment application with their mobile application may talk to their regulators on counterparty credit, cyber security, compliance, payment protocols, licensing and questions over the length of beta test period. A bank’s inquiries are now often met with delays and inconsistencies. Having a single department educating and coordinating various regulatory experts would help speed research and development. 

The Sandbox

While the above initiatives are rife with the potential to create an unneeded layer of bureaucracy that will always be ten steps behind the times, by far the best idea the OCC is having is the creation of an industry sandbox that banks and fintech firms can experiment with. Having the ability to agree on a standard set of communication protocols, permissioning standards, having innocuous sample customer data and then having the ability to get log files easily would be a huge time saver. Sure every bank would also need to bring the application into their own sandbox, but having a standard template and environment that fintech can start with is a great idea and would reduce the risk for all parties.

Project Catalyst

Of course, those involved with banking innovation are going recognize that the OCC’s effort is similar to the CFPB’s Project Catalyst that was announced earlier this year (HERE). While they overlap there appears to be some important differences. Project Catalyst looks to focus more on helping fintech firms understand the financial services industry and the importance of consumer data projection while the OCC’s effort is targeted at helping banks become more focused on innovation. On this point, we also believe the OCC will leverage this new framework to then allow the creation of a limited use “fintech charter.” While some banks will consider this blasphemy as it could be seen as helping fintech competition, our take is that subjecting fintech firms to the same regulatory standard holds greater competitive advantages.  

OCC's Office For Innovation

Questions Into Action


While we have a lot of questions about Westworld, we have even more questions about financial innovation and how best to test, develop, partner and execute on banking technology. Luckily, the OCC is stepping up their technology game. The biggest thing that this framework does is send a message to banks that developing an innovative culture and internal methodology should be the rule instead of an exception. 


The universe of Westworld is set up where the town of Sweetwater is where you start, and it is where things are relatively safe and rote. The OCC is helping banks have the courage to move out of that proverbial town. The OCC’s Framework For Responsible Innovation will hopefully make sure that banks don’t end up in the town of Pariah, as we all saw what happens there.