The FDIC, the Federal Reserve Board and the OCC (collectively, the "agencies") provided a due diligence guide to aid community banks with their risk assessments of FinTech companies.
In the guide, entitled "Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks," the agencies highlight the benefits of entering into relationships with FinTechs, including (i) improved products and services, (ii) more efficient services and (iii) lower costs, but also cautions that such relationships pose risks requiring community banks to conduct due diligence.
The agencies provide "relevant considerations, potential sources of information and illustrative examples" for conducting due diligence, including review of (i) business experience and qualifications; (ii) financial condition; (iii) legal and regulatory compliance; (iv) risk management and controls; (v) information security; and (vi) operational resilience.
The agencies noted that use of the guide as a resource for due diligence is not mandatory, and that the guide does not provide all the tools necessary to scrutinize every type of FinTech relationship or associated risks.
Primary Sources
- FDIC Press Release: Agencies Issue Guide to Help Community Banks Evaluate Fintech Relationships
- FRB Press Release: Agencies issue guide to help community banks evaluate fintech relationships
- OCC Press Release: Agencies Issue Guide to Help Community Banks Evaluate Fintech Relationships
- FIL-59-2021: Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks
- FDIC, FRB OCC Joint Guidance: Conducting Due Diligence on Financial Technology Companies - A Guide for Community Banks
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