To help minority depository institutions and community development financial institutions move forward with digital transformation, lawmakers and regulators must address bottlenecks that limit growth, according to a recent report by the National Bankers Association Foundation. The report on digital opportunities for mission-based banks identified multiple barriers that institutions face as they look to upgrade their technology, including upfront costs, implementation issues, even with current staff skill or capacity, workloads from increased risk management and regulatory compliance requirements, and increased reliance on major vendors and other third-party providers that may not prioritize the needs of smaller customers.

The report had three recommendations for policymakers. First, policymakers should amend current provisions involving bank holding company policies to allow for non-dilutive equity investments from publicly traded companies that will allow banks to increase their credit footprint through digitization. Second, banking supervisors and regulators should allow MDIs and CDFIs to allocate more of their capital to technology and digitization investment, including use in partnerships with fintech companies or other third parties. Third, building on the success of initiatives like the Treasury Department’s Emergency Capital Investment Program, policymakers should continue to look for new ways to attract capital to MDI and CDFI, including through investment programs, tax credits, and appropriations. annual.

“Corporate and philanthropic partners also have an important role to play in supporting mission-driven banks,” the report says. “These stakeholders can provide technical assistance, loan their executives to mission-driven banks for a fixed term to help oversee the implementation of new strategies or technologies, provide access to software or other forms of technology support, and more. ”.

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