Barefoot Innovation Podcast

I get the opportunity to work with regulators all over the world who are building a new, better regulatory model for the digital age. It makes me a good judge -- I know when something is exciting.

And something exciting is happening now at the FDIC. (For listeners outside the United State, the Federal Deposit Insurance Corporation is, among other things, our primary US regulator for small banks.) We’ve had the FDIC chairman, Jelena McWilliams, on the show twice. She is a remarkable leader who is driving an agenda of transformational change to modernize both bank technology and regulatory technology, at the same time. In 2019 she announced the creation of an innovation unit, FDiTech, and embarked on a search for a Chief Innovation Officer.

This spring -- more than two years later, after an extremely diligent search -- she found him. Sultan Meghji has set out to change how bank regulation is done.

One thing that sets Sultan apart from most of his peers at other agencies is that he comes from the tech world. In our talk he describes some of his background, which goes back to the early days of the World Wide Web. He also has experience in the part of the government that is arguably the most sophisticated in using technology, namely national security intelligence. He understands the tech world, which means he deeply understands what could be done by technology, in the financial regulatory space.

In our talk, Sultan lays out the themes of the agency’s innovation work and says that the most urgent one is financial inclusion. He says the evolution of the banking system has lagged the evolution of the population, and talks about how it needs to be “engineered.” He also talks about using technology to build the system’s resilience, its ability to “take a punch.” He looks, too, at how to “protect the future,” to keep up with trends like digital assets, AI and, as he says, “banking on Mars.”

And he explains his vision for what he calls amplification. Sultan says the banking system has always been very human centric, with people having conversations and moving paper around, and he contrasts this to the way the new generation of digital natives do things and what they expect. He notes that there is a lot of “air” between what a 25 year old has on their phone today and what the regulatory system is designed to handle.

One of the most intriguing parts of the amplification vision is the goal of removing “hands on keyboards.” He wants the computers to find the risks, while the FDIC examiners use tablets to track and manage it. He imagines a day when the examiner will get up in the morning, pick up the tablet, check a risk dashboard for a bank or a market sector, and zero in immediately on the key information.

This episode also introduces a topic that I'm working with every day, but that is barely registering yet in most regulatory technology conversations, and that is open source. For those not familiar with it, the tech sector moved long ago to open sourcing most of its computer code. They took the proprietary code they had created and owned, and made it available for everyone else, including competitors, to use, for free. Obviously there is still plenty of proprietary code, but companies learned that by sharing code for functions that are widely needed, the ecosystem could move forward together in ways that would benefit everyone. Open source helps make complex systems interoperable and efficient and nimble. I think it is a big part of the future of regulation.

Sultan says that, for the World Wide Web, open source foundations created a toolbox and let everyone around the world grab tools from it, and then work with them together. He says this led to creation of the largest economic expansion in human history, by orders of magnitude. Almost all of the backbone of the internet is open source. Sultan is intrigued by the opportunity to take this approach and see if it could work in the regulatory space

The day we recorded this program, the FDIC announced plans for its first TechSprint, which will focus on financial inclusion. Sultan also encourages us to watch for other initiatives in the months ahead, including the results of the rapid prototyping project the FDIC launched last year on modernizing the call report, and also its initiative on the potential to use a public/private standard-setting body to make it easier for community banks to evaluate and safely use technology partners and vendors.

We recorded this session on Sultan’s 99th day on the job. I can’t wait to see the next one hundred.

More on Sultan

The Federal Deposit Insurance Corporation (FDIC) named Sultan Meghji as the agency’s first Chief Innovation Officer, charged with leading the FDIC’s efforts to promote the adoption of innovative technologies across the financial services sector.

“As a recognized expert in financial technology, Sultan brings years of technical knowledge and an entrepreneurial spirit to our FDiTech team,” said FDIC Chairman Jelena McWilliams. “Under his leadership, I am confident we will find innovative ways to utilize technology to modernize our bank supervision, enable community banks to adopt technological solutions, and bring more underserved people into the financial fabric of our nation.”

“I am immensely honored to join a team that is working towards finding innovative ways to meet the challenges of tomorrow,” said Mr. Meghji. “It is important that the FDIC leads at this transformative moment in our nation’s banking history. My personal mission is to engage both public and private sector partners to ensure the financial system of the future is innovative, resilient, and equitable.”

Mr. Meghji co-founded Neocova, a financial technology firm providing secure, cloud-native, artificial intelligence-based software for community banks and credit unions. In addition, he worked on an aid mission to help implement digital banking in Kenya, Tanzania, and Uganda, and worked with fintechs and central banks to create peer-to-peer banking solutions for hundreds of thousands of people in underserved areas of Africa and Central Asia.

Mr. Meghji is a nonresident scholar in the Cyber Policy Initiative at the Carnegie Endowment for International Peace. His research focuses on the architecture of the global financial system, cyber and critical infrastructure security, and the impact of artificial intelligence and quantum computing. He is also an adjunct professor at Washington University’s Olin Business School, and a distinguished member of the Bretton Woods Committee and the Missouri Advisory Committee for the U.S. Global Leadership Coalition. Mr. Meghji has served as an advisor to the U.S. Treasury, the Group of Seven (G7), the Office of the Comptroller of the Currency (OCC), and the Federal Bureau of Investigation (FBI) in the areas of cybersecurity, quantum computing, and artificial intelligence.

More for our Listeners

Please follow AIR on LinkedIn and Twitter, and also follow me personally on Twitter @JoAnnBarefoot. And be sure to leave us a five-star rating on your favorite podcast platform.

Next up on Barefoot Innovation we have the Deputy Governor of the Central Bank of Kenya, Sheila M’Mbijjewe, talking about financial inclusion in Africa, especially for women. We will also talk with Jesse Morris, CEO of EnergyWeb, with which AIR partnered to launch our Crypto Climate Accord this year. We’ll also have Melissa Koide, CEO of FinRegLab, on the research on AI.

Later today I’ll be giving a keynote address at the ABA Regulatory Compliance Conference on my vision for the future of compliance. I hope all the bankers in the audience will join or will look for the recording if you miss it. I’m also speaking this morning at the India Economic Times BFSI Tech Leaders’ Summit.

The FDIC will be hosting a webinar this month on ‘Fintech: A Bridge to Economic Inclusion,’ where I will be moderating a fascinating panel discussion. The event is open to the public and has over 2,000 people already signed up, so please be sure to join. You can also mark your calendars for October 21, where I will be speaking at another FDIC webinar, ‘Banking on Data: Great Possibilities, Great Responsibilities.’‘