Pub. 12 2021 Issue 3

Pub. 12 2021 I Issue 3 Fall 13 West Virginia Banker bank from a fintech user to fintech provider and, if done correctly, can be the fastest method of offering new services to customers. Banks taking this approach must be prepared to provide the infrastructure necessary to support the model. This model also requires banks to actively oversee the fintech program and provide compliance and regulatory support. Banks also need to be ready to scale up depending on the success of the model. This model may require prior regulatory approval depending on the level of control exercised by the bank. When considering each model, community banks should undertake the same risk assessment and due diligence procedures that apply to other products and services. Banks will need to manage relationships with fintech companies and develop and implement systems to mitigate risk and address regulatory concerns. Finally, banks may want to explore whether state- sponsored “regulatory sandboxes” offer a way to develop and test new fintech products and services. Many states, including West Virginia, have adopted laws designed to promote innovation in the financial sector and analyze the emerging risks. These “regulatory sandboxes” establish programs through which firms can experiment with new products while simultaneously allowing regulators to study the risks associated with the latest technologies. The West Virginia Division of Financial Institutions has adopted a FinTech Sandbox. The West Virginia FinTech Sandbox enables entities that would typically require licensure in West Virginia to test an innovative financial product or service for a limited period of 24 months. After the end of the sandbox period, if the test of the product or service has been deemed successful, the entity would be able to continue operating in West Virginia subject to any licensure requirements at that time. The program is intended to encourage startup activities and entrepreneurship. The West Virginia Division of Financial Institutions is currently creating a process for accepting and reviewing applications on a secure platform. Until that process is fully operational, any individual or entity interested in discussing potential sandbox activities should contact the Division at fintech@wvdob.org or 304-558-2294 to schedule a pre-application meeting.  About the Authors: Amy J. Tawney is a partner in the Charleston office of regional law firm Bowles Rice. She focuses her practice on banking law, mergers and acquisitions, securities law, and regulatory matters. Contact Amy at (304) 347-1123 or atawney@bowlesrice.com . Sandra M. Murphy leads the Bowles Rice Banking and Financial Services team. Practicing from the firm’s Charleston office, she focuses her practice on acquisition, regulatory, enforcement, corporate governance, and securities law matters for banks and other financial institutions. Contact Sandy at (304) 347-1131 or smurphy@bowlesrice.com. When considering each model, community banks should undertake the same risk assessment and due diligence procedures that apply to other products and services.