Issue 21
January 2025
Welcome to the MBA's News Digest!
Dear readers,
Will 2025 be the year of generative AI for bank marketers?
UK-based money-saving app Snoop launches its first savings account integrating money management features.
The Reserve Bank of India flags concerns over rising delinquency, and leverage in unsecured loans, while Singapore’s parliament has passed a law allowing police to control the bank accounts of individuals suspected to be the targets of scams.
Best wishes,
The MBA team
Regulating AI in the financial sector: recent developments and main challenges
12 December 2024
‘This paper explores the potential transformative impact of artificial intelligence (AI) on the financial sector, focusing on operational efficiency, risk management and customer experience in banking and insurance. It delves into the widespread adoption of AI technologies including generative AI (gen AI) and examines the associated risks and regulatory implications. While AI exacerbates existing risks such as model risk and data privacy, it does not introduce fundamentally new risks apart from gen AI, which may give rise to hallucination and anthropomorphism risks. Most financial authorities have not issued AI regulations specific to financial institutions as existing frameworks already address most of these risks. Nevertheless, some areas require further regulatory attention, including governance, expertise and skills, model risk management, data governance, non-traditional players in the financial sector, new business models and third-party AI service providers.’
CFPB finalizes rule removing medical bills from credit reports
7 January 2025
‘The rule also prohibits lenders from considering medical information when making lending decisions. In 2003, Congress restricted lenders from obtaining or using medical information, including information about medical debts, but gave regulators the authority to issue a rule to protect lenders’ legitimate risk, consumer, and other needs. Federal regulators subsequently issued a rulemaking to protect lenders’ ability to use medical debts in their credit decisions pursuant to Regulation V, which implements the Fair Credit Reporting Act, or FCRA. The CFPB’s new rule amends Regulation V to remove that protection. The American Bankers Association and other groups raised numerous concerns about the rule after it was first proposed, saying it would increase credit risk and reduce credit availability for consumers. ABA also said the rule violates the Administrative Procedure Act because the CFPB is giving itself authorities that Congress did not intend and the rule is not supported by adequate evidence or reasoning.’
CFPB Sues Wells Fargo, JP Morgan…. over alleged fraud on Zelle network
3 January 2025
‘The Consumer Financial Protection Bureau (CFPB) sued Bank of America, JP Morgan Chase, Wells Fargo (the banks) and EWS (collectively, the financial institutions), accusing them of failing to take timely and effective steps to prevent, detect, limit, and address fraud on the Zelle network. Zelle is a peer-to-peer platform used by over 2,200 banks and credit unions to transfer money almost instantly. Along with being part owners of EWS, the banks are the largest participating banks in the Zelle network. According to CFPB, when Zelle launched, banks prioritized a quick rollout to capture market share and used their existing customer base to offer peer-to-peer money transfers directly to consumers. As a result, CFPB claimed that the rush to market hurt consumers, as the financial institutions allegedly failed to implement effective anti-fraud measures or comply with consumer financial protection laws.’
OCC’s Hsu discusses deposit insurance reform, domestic bank regulation
2 January 2025
‘When it comes to regulatory reform, solving the public stigma for using the discount window is crucial, as there is no other way for banks to get same-day liquidity, Hsu said. The acting comptroller also cited a need for deposit insurance reform, saying he favored expanding the program to provide additional coverage for business transactions and business payment accounts. The problem is the banking industry can’t agree on the type of deposit insurance reform it wants, he said. “If you can get agreement on a single option, that will provide the impetus for Congress to coalesce around that we can get this done.”…. Hsu has previously suggested that banking agencies should consider creating a heightened regulatory and supervisory framework for “systemically important” domestic banks like that in place for global systemically important banks. Asked about his proposal for “DSIBs,” Hsu again pointed to SVB, saying it showed there are some non-GSIB domestic banks that pose a systemic risk to the financial system if they were to fail in a disorderly way.’
2025 bank marketing trends
2 January 2025
‘Deposit growth will be fueled by a balanced approach of new customer acquisition, existing customer relationship deepening and improved retention, especially of larger deposit customers. This objective was top of mind among the bank marketers we spoke to, as they offered their input to what trends are going to drive bank marketing in 2025. A recent ABA survey of bank marketers provided additional input, as did generative AI. The six emerging trends these sources agreed upon are: Personalized hyper-targeted marketing; Performance marketing; Customer data analytics; Marketing automation; Relationship and loyalty; and Generative AI. Taken together, these six trends indicate a significant shift towards more customer-centric, flexible and technologically integrated marketing approaches in the banking sector as we move into 2025.’
RBI flags unsecured lending, private credit; calls for enhanced vigilance
27 December 2024
‘The regulator also raised alarms over top-up loans, noting that such products are often sanctioned with minimal due diligence and lenient underwriting standards. It found instances of lax adherence to prudential guidelines on loan-to-value (LTV) ratios, risk weights, and the monitoring of end-use of funds. “These practices could lead to build-up of risks, especially during times when collaterals for such loans become volatile or face cyclical downturns,” it said. Last year, the RBI mandated banks to treat top-up loans as unsecured. The regulator may consider further tightening of norms on top-up loans, if needed. “The Reserve Bank will assess the need, if any, for additional regulatory interventions to mitigate the identified risks in cases of other top-up loans,” the report said.’
Money-saving app Snoop launches savings account
8 January 2025
‘The new Snoop Easy Access Savings Account requires a minimum balance of £1 to encourage users to begin saving immediately, and offers a 4% AER/3.92% gross variable interest rate. Account holders can withdraw money at any time without being charged a fee. Users can track their spending, receive savings nudges, and benefit from tailored recommendations through the Snoop app, which uses Open Banking technology. Eight out of 10 Snoop customers attest that it is much easier to keep on top of their money and spending using the app.’
Ethiopia Implements Fayda Digital ID for All Banking Transactions
8 January 2025
‘The rapid growth of APIs has reshaped financial services, but it has also created vulnerabilities that can no longer be ignored. These persistent challenges demand a proactive, forward-looking approach. By embedding security into the DNA of API management, fostering collaboration between teams, and learning from past mistakes, financial institutions can build robust defences against evolving threats. APIs are the backbone of tech and financial institutions are the backbone of funding future industry and economic growth – securing them is essential for innovation.’
Portuguese Banking Giant BiG Shuts Door on Crypto Transfers
8 January 2025
‘The decision comes amid increased pressure from European regulators on financial institutions to tighten oversight of crypto-related activities. BiG pointed to compliance with recommendations from the European Central Bank, the European Banking Authority, and the Bank of Portugal. The banking giant emphasized that its decision to stop fiat transfers also aligns with its efforts to adhere to national regulations aimed at combating money laundering and terror financing.’
Singapore Passes Bill That Lets Police Control Bank Accounts
8 January 2025
‘The Protection from Scams Bill passed Tuesday gives the police powers to issue restriction orders to banks, which will then limit the banking transactions of people’s accounts. The bill, which was proposed last year, was originally aimed at protecting potential victims from scams conducted remotely, such as via phone calls or online platforms. It has been broadened to cover other kinds of cheating cases involving physical interactions. “The threat will keep evolving, and we must ensure that we have the appropriate tools to deal with this threat, as this bill aims to do,” Minister of State for Home Affairs Sun Xueling said in parliament.’
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