The compliance software company Tandem fleshed out its incident recovery plan for banks. The fintech Goalsetter broadened its product set and business from serving children to serving families. A community development financial institution in California created and spun off a new lending-as-a-service company. These are some of the ways startups that have been through the Federal Deposit Insurance Corp.’s tech sprints have been changed by the experience.
The FDIC’s tech lab FDITECH’s sprints were spearheaded in 2021 by Chief Innovation Officer Sultan Meghji, who left the agency on Friday. Chosen teams that consist of banks, nonprofits and private companies take three weeks to brainstorm a solution to a problem statements posed by sprint organizers, and pitch their ideas at a demo day. Many of the winners credit the program with inspiring new features or products, motivating them to accelerate vague notions on their road maps and giving them a megaphone to publicize their ideas.
More broadly, the program could expose regulators to fintech solutions and explore new ideas from companies they would otherwise never have encountered.
The goals, as outlined by Meghji, are to increase engagement and transparency between the public and private sectors and for people at the FDIC to learn how outside organizations are thinking about innovation. The experience also shines a light on the importance of time limits in keeping energy high and people productive.
“The government banking sector doesn’t do things quickly,” said Meghji. “We want to impress [upon people] that you can get something valuable done in just a few weeks.”
In some cases, a sprint helped a company lean harder in a direction in which it was already heading.
“The sprint was definitely an impetus for positioning Goalsetter as a fintech platform for the whole family, not just for kids,” said Tanya Van Court, CEO and founder of the New York-based Goalsetter. “Employee benefits and white-labeling seemed like a natural way to help make that happen, and that approach was born out of doing this exercise for the FDIC presentation.”
Other teams conjured up entirely new services for the U.S. market.
The National Asian American Coalition, a community development financial institution in Daly City, California, and Talino Ventures Labs, a venture studio in Los Angeles that builds financially inclusive fintech around the world, joined forces to win the Market Readiness category in the summer tech sprint. The two pitched a small-business loan based on the concept of social borrowing, where a group of individuals who could not qualify on their own co-guarantee each other.
That product will have its early-access launch in March. But the win also motivated Talino to spin off a standalone lending-as-a-service company called
“We wanted to not only reach the last mile of the unbanked, but also get that last mile of borrowers that are in need of a loan,” said Rachelle Baliao, business development lead for Asenso.
The second tech sprint, in the fall, tasked participants with devising measures and tools for financial institutions, especially community banks, to test their operational resilience against any sort of disruption, such as natural disasters or cyberattacks. All three winners are in various stages of bringing their products to market.
Data Society, a company in Washington, D.C., that provides customized training and artificial intelligence solutions, teamed up with Google to build on the CAMELS rating system for evaluating bank risk, which stands for Capital Adequacy, Asset Quality, Management Capability, Earnings, Liquidity and Sensitivity. Data Society’s proposed CAMELSBACK system takes Backup and Recovery, Assessment, Cyber and Communications, and Key Personnel into account. The CAMELSBACK system will be a technical architecture available on Google Cloud that blends and analyzes bank-specific data, market information and alternative data.
“We have done projects with financial institution customers, thinking through data systems that need to exist to ensure operational resiliency,” said Dmitri Adler, the chief solutions architect and co-founder of Data Society. “What we had not thought through with those customers is a standard risk framework, how we standardize data and operational controls that we’ve been helping banks deploy.”
Google weighed in on security wrappers and data protection, how to ensure the system would be compliant with federal regulators, and which tools from the Google suite could be plugged into the architecture. The team won in the Creativity category.
Global Resilience Federation, a nonprofit in Herndon, Virginia, that connects security information sharing communities, had its Operational Resilience Framework recognized by the FDIC for effectiveness and impact. The federation collaborated with cybersecurity firm TrustMAPP to devise a tool that, through a series of questions, could help organizations assess and track progress toward operational resilience.
The first release of the framework rules were submitted in February to a plenary committee for review, will be published in April for public commentary, and are scheduled to be finalized and released in June. The federation had been working on such a framework for months earlier with Trey Maust, executive chairman of Lewis & Clark Bancorp in Oregon City, Oregon, and other security and risk management professionals.
“We thought the tech sprint was a good place to showcase the work we had been doing and the progress we made since the spring of 2021,” said Mark Orsi, the Global Resilience Federation's president and CEO. “This stamp of approval will give us leverage as we go forward.”
Tandem is a company whose software helps 1,500 community banks maintain regulatory compliance. During the sprint, the team enhanced its incident management software to go beyond creating a response plan and maintaining records. The new features, all of which are now live or nearly there, also help banks walk through the steps necessary to respond to an incident, discuss potential scenarios, view incident metrics on a dashboard and anonymously compare data with their peers. Tandem, which is owned by the security and compliance firm CoNetrix in Lubbock, Texas, won the Market Readiness category in the sprint, for presenting a solution that could easily be deployed.
“The sprint forced us to sit down and focus on one specific problem in a way that fits within our software,” said Brian Whipple, marketing manager of CoNetrix. “We may have eventually come up with these ideas, but it made us hammer them out quickly.”
The third sprint, about measuring the effectiveness of digital identity proofing, recently closed registration and will kick off in March. Individuals were able to apply for the first time.
“We are focused on ensuring we are not just hearing from usual suspects,” said Meghji, noting that some companies that applied in the past were names none of his team were familiar with. “We need to see beyond the Beltway.”
Jo Ann Barefoot, CEO and co-founder of the Alliance for Innovative Regulation, says tech sprints “may be the best regulatory innovations ever invented,” noting that the format helps regulators save months or even years of exploration and usually result in a prototype rather than just a white paper or working group.
“They cross-pollinate skills, especially by bringing together regulatory and tech people,” she said. “There are many, many challenges that seem unsolvable to regulators. The regulators, generally speaking, don't understand the technology possibilities, and tech people generally don't know about the problems — and also don't realize how interesting and important they are.”
