Financial Technology: Agencies Can Better Support Workforce Expertise and Measure the Performance of Innovation Offices
Fast Facts
Banks and credit unions are increasingly using new technology—known as "fintech"—for services like paying bills with mobile wallets. So it's crucial that regulators have the necessary skills to make policy for and oversee fintech.
Federal regulators require many of their employees to have some technology skills, such as data analysis. But the agencies haven't assessed or identified critical fintech skills or skill gaps they need to address.
In addition, some agencies have offices dedicated to financial innovation and technology, but they don't have performance goals and measures for this work.
Our recommendations address these issues.
Highlights
What GAO Found
Financial technology refers to the use of technology and innovation to provide financial products and services. The Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corporation (FDIC), Board of Governors of the Federal Reserve System, National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) require many of their staff responsible for policymaking and oversight related to financial technology to have some level of technological skills, according to 181 position descriptions GAO reviewed. The skill requirements ranged from basic technological skills, such as knowledge of office software, to more specialized knowledge, such as expertise in data analysis. The agencies expressly required knowledge of financial technology in 18 of the position descriptions. GAO held focus groups with agency staff where less than half of the participants said they had financial technology-related skills.
The agencies have taken some steps to incorporate leading workforce planning practices identified by GAO in prior work. For example, all of the agencies have developed programs or provided training to help develop staff knowledge of financial technology. However, the agencies have not systematically or comprehensively collected data on their policymaking and oversight staff's technological skills related to financial technology or conducted assessments to determine the financial technology skills these staff need. The agencies also have not measured the effectiveness of their financial technology training in addressing their skill needs. By fully incorporating leading workforce planning practices, the agencies could help ensure their staff have the knowledge and skills needed to effectively conduct policymaking and oversight related to financial technology.
CFPB, NCUA, and OCC have offices dedicated to addressing innovation in financial technology or the financial industry more broadly. These innovation offices research and monitor industry developments and communicate with industry participants, such as through conference participation (though CFPB's and OCC's offices have recently paused or stopped some outreach and innovation-related activities). The three innovation offices, however, have not developed performance goals or measures that target their key activities. Doing so could help ensure the offices are better able to assess the effectiveness of their initiatives and the extent to which they are accomplishing their missions.
All of the regulators reported using a variety of technologies to improve their supervisory capabilities. Examples include a tool that reviews compliance with certain legal requirements and the use of machine learning techniques to help identify risk. Additionally, all of the regulators had at least one strategic objective focused on improving supervision with technology. However, CFPB, the Federal Reserve, NCUA, and OCC have not developed performance measures for these objectives. Doing so could better position the agencies to gauge their progress toward enhancing their supervisory capabilities through the use of technology.
Why GAO Did This Study
Financial institutions are increasingly using financial technology. However, policymakers have raised questions about whether regulators' staff have the technological skills and expertise needed to oversee entities offering products and services that use this technology. GAO was asked to review regulators' financial technology expertise, among other issues. This report examines (1) the technological skills or expertise of regulators' staff, (2) regulators' workforce planning practices, (3) how regulators address innovation in financial technology, and (4) how regulators use technology to improve their supervisory capabilities.
GAO reviewed 181 position descriptions and documentation on regulators' workforce planning, innovation offices, and supervisory technology. GAO also conducted 16 focus groups with nongeneralizable samples of policymaking and oversight staff from each agency (90 total staff across the five agencies).
Recommendations
GAO is recommending that all five agencies collect staff skillset data and fully incorporate leading workforce planning practices; that CFPB, NCUA, and OCC develop performance measures for their innovation offices; and that CFPB, the Federal Reserve, NCUA, and OCC develop performance measures for their supervisory technology strategic objectives. NCUA agreed with the recommendations. CFPB, FDIC, the Federal Reserve, and OCC did not agree or disagree with the recommendations, but indicated they would take actions to implement them.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Consumer Financial Protection Bureau | The Director of the Consumer Financial Protection Bureau should fully incorporate leading workforce planning practices in the primary offices involved in policymaking and oversight related to financial technology by conducting strategic workforce planning that addresses financial technology; collecting staff skillset data and determining the critical financial technology skills the agency needs; developing targeted strategies to address financial technology-related skills gaps; and measuring the effectiveness of its financial technology-related training in addressing skill needs. (Recommendation 1) |
In June 2024, CFPB officials said the agency has initiated the process to hire staff to begin work on fully incorporating workforce planning practices in the primary offices involved in policymaking and oversight related to financial technology. We will continue to monitor agency progress towards implementing this recommendation.
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| Consumer Financial Protection Bureau | The Director of the Consumer Financial Protection Bureau should develop performance goals and measures for CFPB's Office of Competition and Innovation that cover key aspects of the office's activities, such as outreach to industry participants, and that are clear, targeted, and measureable. (Recommendation 2) |
In June 2024, CFPB officials told us the agency is in the process of developing performance goals and measures for CFPB's Office of Competition and Innovation. CFPB expects to complete this process in 2025. We will continue to monitor agency progress towards implementing this recommendation.
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| Consumer Financial Protection Bureau | The Director of the Consumer Financial Protection Bureau should develop performance measures that are specific to its strategic objectives related to supervisory technologies. (Recommendation 3) |
In June 2024, CFPB officials told us the agency is in the process of developing performance measures that are specific to its strategic objectives related to supervisory technologies. CFPB expects to complete this process in 2025. We will continue to monitor agency progress towards implementing this recommendation.
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| Federal Deposit Insurance Corporation | The Chair of the Federal Deposit Insurance Corporation should fully incorporate leading workforce planning practices for the primary offices involved in policymaking and oversight related to financial technology by collecting staff skillset data and determining the critical financial technology skills the agency needs; developing targeted strategies to address financial technology-related skills gaps; and measuring the effectiveness of its financial technology-related training in addressing skill needs. (Recommendation 4) |
In June 2024, FDIC officials told us the agency is working on corrective actions to address this recommendation. FDIC expects to complete this process by December 31, 2024. We will continue to monitor agency progress towards implementing this recommendation.
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| Federal Reserve System | The Chair of the Board of Governors of the Federal Reserve System should fully incorporate leading workforce planning practices in the primary offices involved in policymaking and oversight related to financial technology by collecting staff skillset data and determining the critical financial technology skills the agency needs; developing targeted strategies to address financial technology-related skills gaps; and measuring the effectiveness of its financial technology training in addressing skill needs. (Recommendation 5) |
In April 2024 , Federal Reserve officials said they are in the early stages of collecting data on staff skills related to financial technology. Once the data are collected over time for supervisory and policy staff, the officials indicated the Federal Reserve plans to develop and customize training to address knowledge gaps and supervisory needs related to financial technology. We will continue to monitor agency progress towards implementing this recommendation.
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| Federal Reserve System | The Chair of the Board of Governors of the Federal Reserve System should develop performance measures that are specific to its strategic objectives related to supervisory technologies. (Recommendation 6) |
In April 2024, Federal Reserve officials said they will evaluate developing performance measures related to supervisory technologies in alignment with the goals and objectives of the Federal Reserve's 2024-27 strategic plan and the initiatives in its annual performance plan. Federal Reserve officials said progress towards achieving these goals, objectives, and initiatives will be reported in the Federal Reserve's annual performance report. In July 2024, officials said Federal Reserve staff have initiated the collection and review of best practices regarding developing and using performance measures to support supervisory activities. Staff also continue to document and revise performance goals based on input received through the Federal Reserve's strategic planning process, according to the officials. We will continue to monitor agency progress towards implementing this recommendation.
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| National Credit Union Administration | The Chair of the National Credit Union Administration should fully incorporate leading workforce planning practices in the primary offices involved in policymaking and oversight related to financial technology by conducting strategic workforce planning that addresses financial technology; collecting staff skillset data and determining the critical financial technology skills the agency needs; developing targeted strategies to address financial technology-related skills gaps; and measuring the effectiveness its financial technology training in addressing skill needs. (Recommendation 7) |
In June 2024, NCUA officials told us they collected information from its offices and regions on current and future impacts of financial technology on workload, business processes, competency requirements, and staffing levels. NCUA officials said they are currently analyzing this information to identify the overarching skill and competency needs related to financial technology within the agency. Once the analysis is complete, officials said NCUA plans to develop and implement human capital strategies and solutions to address and mitigate those financial technology related workforce gaps and needs discovered in this process. We will continue to monitor agency progress towards implementing this recommendation.
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| National Credit Union Administration | The Chair of the National Credit Union Administration should develop performance goals and measures for NCUA's Office of Financial Technology and ACCESS that cover key aspects of the office's activities, such as outreach to industry participants, and that are clear, targeted, and measureable. (Recommendation 8) |
In January 2024, NCUA published its 2024 Annual Performance Plan, which included an objective to ensure NCUA policies and regulations appropriately address emerging and innovative financial technologies, including digital assets. In March 2024, NCUA officials told us the agency was developing specific performance measures to identify barriers to the credit union industry adopting technology and to engage external stakeholders. We will continue to monitor agency progress towards implementing this recommendation.
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| National Credit Union Administration | The Chair of the National Credit Union Administration should develop performance measures that are specific to its strategic objectives related to supervisory technologies. (Recommendation 9) |
In March 2024, NCUA officials told us NCUA was developing a business plan that will include performance measures that are specific to NCUA's strategic objective related to supervisory technologies. We will continue to monitor agency progress towards implementing this recommendation.
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| Office of the Comptroller of the Currency | The Comptroller of the Currency should fully incorporate leading workforce planning practices in OCC's primary offices involved in policymaking and oversight related to financial technology by collecting staff skillset data and determining the critical financial technology skills the agency needs; developing targeted strategies to address financial technology-related skills gaps; and measuring the effectiveness of its financial technology-related training in addressing skill needs. (Recommendation 10) |
In May 2024, OCC officials told us they were in the process of developing planned actions for this recommendation. OCC expects to complete plan development by the end of September 2024. We will provide updated information once we confirm what additional actions the agency has taken in response to this recommendation.
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| Office of the Comptroller of the Currency | The Comptroller of the Currency should develop performance goals and measures for OCC's Office of Financial Technology that cover key aspects of the office's activities, such as outreach to industry participants, and that are clear, targeted, and measureable. (Recommendation 11) |
In May 2024, OCC officials told us they were in the process of developing planned actions for this recommendation. OCC expects to complete plan development by the end of September 2024. We will provide updated information once we confirm what additional actions the agency has taken in response to this recommendation.
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| Office of the Comptroller of the Currency | The Comptroller of the Currency should develop performance measures that are specific to OCC's strategic objectives related to supervisory technologies. (Recommendation 12) |
In May 2024, OCC officials told us they were in the process of developing planned actions for this recommendation. OCC expects to complete plan development by the end of September 2024. We will provide updated information once we confirm what additional actions the agency has taken in response to this recommendation.
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