- within Compliance, Insurance and Wealth Management topic(s)
For financial technology companies (Fintechs), finding the right banking sponsor can feel like a bad dating experience. You're tired of meeting the wrong type of financial institutions (FIs) that seem good on paper, and then when you finally meet, they say or do something that is a deal breaker. Or when you think you've made a connection, they bail on you for no reason, leaving you high and dry. You want to find a financial institution with attractive prospects, that has the same goals and interests as you, and who will invest in a long-term commitment – but at this point, you just don't know how to go about finding the right one. Thankfully, a financial institution's expectations regarding Fintech relationships are much more predictable than those of a prospective romantic partner, which can give you an edge when trying to woo a banking sponsor.
Fintech relationships are appealing to banks and other traditional FIs because they allow FIs to adopt newer, faster, and more convenient technologies while broadening their customer base and enhancing the customer experience.
However, recent federal guidance and enforcement actions have placed an expectation on FIs to develop and implement higher standards of oversight when managing Fintech relationships.
Subsequently, Fintechs are seeing more responsibilities being placed on them in their master services agreements (MSAs) and are expected to regularly demonstrate compliance with regulatory and contractual requirements through independent third-party reviews.
Third-party relationship management (TPRM) is the initial and ongoing process FIs undertake to identify, assess, and minimize the risks associated with outsourcing critical processes to third parties and service providers. When preparing to get into the banking sponsor relationship game, an FI is expected to have a robust TPRM program and processes to maintain adequate oversight of Fintechs. Therefore, if you've spotted your ideal banking partner, it's important to understand what TPRM expectations the FI has, how you can meet their relationship needs, and get what you want from them as well.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
