Implication 4: Regulators must cast a bigger net to increase oversight of opaque third-party data providers.

One thing’s for certain: In the age of AI intelligence in FSI operations, banking and insurance regulators are widening how they oversee FSIs. They’ve also made crystal clear that the focus isn’t just on the FSI’s, it’s now on the data providers that FSI depend on that enable underwriting and claims decisions, fraud detection, creditworthiness, and anti‑money‑laundering compliance, among others. For technology leaders, this shift reflects the operational reality that regulators now understand: the decisions rendered are only as good as the data feeding the systems behind them. 

Regulators have made the call that third‑party risk management is a supervisory expectation. The Federal Reserve, OCC, and FDIC have jointly emphasized that banks must demonstrate full visibility into how external data is sourced, validated, and governed. Meanwhile, US state insurance regulators are scrutinizing the use of alternative data and AI‑driven models, warning that unregulated data inputs can introduce bias, distort pricing, and undermine consumer protections. And as this data reliance deepens and expands, it represents a big systemic risk that isn’t going to managed just by of banks and insurers themselves. The data ecosystem has is now too big, too influential, and too opaque—to remain outside the purview of the regulators. 

If external data drives core decisions, regulators expect the same rigor you apply internally. That means regulators now expect direct visibility into data lineage, validation practices, and governance controls at the provider level—not just inside the institution. The days of “We trust our vendor” are officially over. Regulators want evidence that the data itself is trustworthy. For technology decision makers, this means preparing for a world where: 

• Your regular vendor assessments are going to look a lot more like model validations
• Data provenance and audit trails will become exam‑ready artifacts
• Legal and compliance teams—and their firm’s tech decision-makers—will be demanding stronger rights to inspect, test, and challenge data quality
• Any “Black box” data will be liability from a regulatory standpoint

The FSI’s that get ahead of this—by demanding transparency, tightening governance, and treating data providers as extensions of their own risk stack—will be the ones best positioned when the regulatory boundaries spread.