Innovation, Payments and Banking Technology


  • ICBA supports and encourages community banks to innovate, both organically and through partnerships with other innovators, to provide their customers with high-tech products and services while still providing relationship-based banking.
  • ICBA supports a clear legal and regulatory framework, coupled with a supervisory process, that fosters innovative financial services.
  • ICBA supports banking and markets regulators’ Offices of Innovation’s efforts to create balanced and flexible policies and regulations that facilitate bank exploration of innovative products and services.
  • ICBA supports the Agencies’ efforts to consolidate their individual third-party guidance into a harmonized framework.
  • ICBA supports industry and regulatory efforts to streamline and harmonize existing regulations to equally cover financial institutions, financial technology companies (fintechs), and third-party services providers that provide products and services to the financial industry.
  • ICBA recommends that Congress amend the Bank Service Company Act (“BSCA” or “Act”) to provide (1) an option for direct supervision of fintechs and (2) a presumption of compliance for banks that form a relationship with those fintechs.
  • ICBA believes that regulators should not act prematurely to promulgate rules and regulations that inadvertently stifle innovations that could lower costs and benefit the industry and consumers alike.
  • ICBA encourages regulatory agencies to publish examination results of third-party service providers and fintechs in a timely manner. Current FFIEC examination results, for example, are often not available to banks to use in their vendor management programs for as long as a year from examination date.
  • ICBA encourages community banks to actively participate in efforts to establish standard-setting and voluntary-certification programs that support community banks’ efforts to implement models and manage model risk.


Fintech and Third-Party Service Providers. Fintechs offer new channels to financial products and services for consumers and small business and can serve as valued partners to community banks. Third-party service providers provide both products and services to the financial sector in the form of software, core solutions, processing, cybersecurity, and other services.

Innovation. Technological innovation and deployment, particularly digital innovation, continue to alter the ways that consumers and businesses conduct banking and commerce and influence the products that community banks offer. Additionally, technology deployment may alter the risk profile of community banks and subject them to a myriad of regulatory requirements and oversight while often fintechs and third-party service providers are not held to the same regulatory requirements thereby creating a competitive advantage over banks and increasing risk within the financial sector.

Guidance for Novel Technologies. The banking agencies play a valuable role in defining and identifying the risks of existing and emerging technologies for both community banks and their service providers. Continued publication of guidance is helpful for community banks that want to explore novel products and services, such as artificial intelligence, early wage access, buy now, pay later, and income share agreements.

Relevant Resources


  • ICBA strongly urges core processors and other technology partners to help community banks enhance their market position and achieve ongoing efficiency by:
    • Meeting and exceeding evolving customer expectations for banking and payments products and services in a timely manner.
    • Complying with legal and regulatory requirements.
    • Managing operational risk.
    • Providing information about incident response and business continuity plans.
    • Enhancing customer information security.
  • ICBA urges technology partners to engage in negotiations with community banks that result in contracts that are reasonable, fair, and clearly disclose fees.
  • ICBA urges core processors to provide adaptable, flexible, timely, and affordable platforms that enable community banks to innovate in a nimble and efficient manner through open application programming interfaces (APIs).
  • ICBA urges core processors to provide access to secure data analytics solutions so community banks can better understand and serve their customers and leverage market opportunities.


Core processors play a critical role in providing open communication, visibility into cyber and operational risk management, and education regarding new and enhanced products and services, modern technology, and marketplace developments.

The community bank-core processor relationship should be treated as a key strategic relationship, given the critical role of the core processor in supporting a community bank’s long-term technology and business objectives, ability to remain compliant, and for the bank’s continued success. ICBA encourages community banks to remain actively engaged with their technology partners to influence innovation, product development and speed to market so banks remain competitive.


According to the 2019 Triennial Federal Reserve Payments Study, Americans still write a significant number of checks. The study reveals that Americans exchanged 14.5 billion checks in 2018 for a combined value of $25.80 trillion, a decline of 3.6 billion checks and $3.39 trillion in value since 2015.

The study uncovered other interesting details about the evolving use of checks. Specifically, the Federal Reserve notes that the average value of a check continues to increase—up from $945 in 2000 to $1,779 in 2018.

However, the Triennial Federal Reserve Payments Studies have also captured swift declines in total value and volume since 2000. Checks represented 58.8 percent of all noncash payments in 2000 but dropped to 8.3 percent by 2018. Similarly, checks’ share of total noncash value plunged from 67.4 percent in 2000 to 26.6 percent in 2018.

Much of today’s volume is driven by small businesses due to the slow, but gradually increasing, adoption of electronic payments for B2B payments. Community banks, however, have championed solutions, notably remote deposit capture, to improve check processing for small-business customers.

Regardless of the recent decline, checks continue to be an important payment method, especially for businesses. Although the extinction of the check has been predicted for years and the pandemic has accelerated the switch to electronic payments, there is no indication that checks will completely disappear anytime soon.

The United States has never retired a payment system despite the addition of newer, faster, and more efficient methods. However, the expansion of remote deposit capture, aided by the proliferation of smartphones, indicates that fewer people will need to make a trip to a bank branch to deposit a check.

This is an important development because it demonstrates that community banks are meeting the challenge to deliver electronic payments and financial services to wherever their small-business customers are located—at home, at the office, or on the go.

Remote deposit capture

Checks are one of America’s most enduring payment methods. However, as the economy grows increasingly digital, banks and consumers are embracing the technology of remote deposit capture. The adoption of this technology allows community banks to meet the modern needs of customers and bridge the physical-digital divide by bringing the “bank branch experience” to mobile devices.

Remote deposit capture (RDC) describes technologies that allow bank customers to electronically “deposit” an image of a check without having to visit a branch or ATM to deposit the physical item. There is a misconception that smartphones with cameras inspired the development of RDC. In fact, RDC was developed a few years before the surge in smartphone popularity.

The critical first step in the development of RDC was the passage of the Check Clearing for the 21st Century Act, also known as the Check 21 Act. Check 21, which took effect Oct. 28, 2004, allowed for the creation of a new negotiable instrument called a “substitute check,” which serves as a replacement and legal equivalent of the original paper check.

Like a paper check, a substitute check has images of the front and the back—both sides are required for a bank to process the item. Customers transmit these images to the bank via the internet. Upon receipt, banks then clear and settle the substitute check electronically.

By using the speed of the internet and electronic clearing and settlement, RDC allows for much faster and efficient processing of checks, thereby saving banks time and money and expediting funds to customers’ accounts. ICBA supports ongoing innovation with RDC to reduce fraud concerns, improve customer experiences, and introduce even greater processing efficiencies for checks.

Digital Banking

As new technologies become available and more Americans gain access to high-speed and mobile internet services, digital banking is proving to be a critical service and differentiator for community banks.

According to the FDIC’s most recent report on the state of banking in the United States, more consumers said mobile banking is their primary method of bank account access. The 2019 survey found 34 percent claim mobile banking as their preferred method, up from 2017 when 15.6 percent said mobile banking was their main form of access. The same study also recorded a decline in online banking as a primary method of access—22.8 percent claimed “online banking” as a primary method in 2018, down from 36 percent in 2017.

The growth in mobile banking is also supported by studies conducted by researchers with the Federal Reserve Bank of Boston. The 2019 Federal Reserve Mobile Financial Services Survey of Financial Institutions queried respondents about the range of retail customer enrolled in mobile banking.

According to the survey 65 percent of banks reported at least 21 percent of their customers signed up for mobile banking services. A close examination of mobile banking also revealed that 71 percent of banks indicated that customer usage rates exceeded 21 percent—clearly a sign that customers have eagerly adopted enhanced digital and mobile financial services[BL1] .

Consumers, however, are not the only ones embracing the digital economy—businesses are also doing much more with digital and mobile banking.

The Federal Reserve study asked respondents for information on the mobile financial services they offer to business clients. Not only did more banks offer such services than credit unions, a higher percentage (14 percent vs. 7 percent) revealed plans to provide mobile banking for businesses in the next two years.

Perhaps more significantly, the survey highlighted a reluctance among credit unions to help businesses—29 percent had no plans to offer mobile products for businesses. The three most popular business mobile products and services were:

  1. Viewing balances and cash positions.
  2. Account-to-account transfers within the same institution.
  3. Remote deposit.

Innovation in financial services is unfurling at a rapid pace. New faster payment technologies seem poised to power the next generation of financial services.

Although faster payments, especially instant payments, are not yet ubiquitous, the launch of the FedNow will usher in a new era of digital banking for community banks and customers.

Instant payments will give banks and their service providers a new infrastructure with which to build augmented digital platforms to meet the needs of a high-speed economy increasingly driven by mobile devices.

ICBA supports the efforts of community banks and their technology partners to enhance relationship-based banking through innovative technologies to meet the diverse needs of customers.