🏗 Elevating Bank-Fintech Partnerships —What Comes Next?
Feels like these partnerships have been around forever, but it's only been a few years. We're entering a new phase for the financial services industry in all stakeholders need to raise their game.
Hey FinTech friends 👋,
What happens when the rapid rate of innovation from bank-fintech partnerships hits a regulatory wall?
📅 Its mid-2025 and we’re in the midst of finding out. We’re now in a phase of industry maturation and limited growth — learning/evolving from consent orders, provider shutdowns, and banks exiting the sector.
From enforcement actions to data breaches and protection of customer funds, the risks with sponsor banks and fintech partnerships quickly escalated in the last 3 years.
📝 Here’s context on the shifting landscape for key partners, how regulators are responding, and what’s needed from both sides (banks & fintechs) in moving forward.
Enjoy the weekend 🏝,
William M. (Founder, Director @FinTechtris)
A Recap of Bank-FinTech Partnerships
In the past five years, these partnerships enabled fintechs to leapfrog regulatory complexity by partnering with licensed banks.
From debit cards & savings accounts to lending, these collaborations allowed startups to launch programs that serve the underserved — in months (not years). Sponsor banks like Evolve, Blue Ridge, Cross River, and Sutton made fintech sponsorships possible.
The structure of these partnerships proposed a WIN-WIN: fintechs gained access to essential banking rails without needing to navigate chartering and licensing hurdles, while community & regional banks gained increased new deposits + revenue streams.
The business model (built on speed & scale) was possible through streamlined integrations (via APIs) and cloud-native systems — onboarding fintech platforms in weeks (not months).
With unprecedented scale in users & transaction volume, vulnerabilites began to appear.
Fueled by venture capital funding, many fintechs focused on vanity goals (such as user count) instead of robust controls and operating practices. On the bank side, there was inexperience with these partnership models and a lack of staffing resources, and monitoring systems to operate securely under charters.
Bank regulators began to scrutinize not only fintechs, but the banks behind them. With recurring lapses in risk management, the impetus grew for tighter frameworks from sponsor banks supporting fintechs in this partnership model.
It was clear that the push for innovation outpaced regulatory clarity and necessary controls (from banks & fintechs) in protecting consumers.
As we approach mid-2025, both fintechs and sponsor banks are recognizing that long-term sustainability is based on a joint approach to rigorous controls for compliance & risk management.
Enforcement Actions Highlights Regulatory Posture
2024 and 2025 showed numerous enforcement actions against sponsor banks.
The FDIC, state regulators, and the OCC issued consent orders against banks (most recently Hatch and Quaint Oak), citing deficiencies in anti-money laundering protocols and third-party risk management.
In Hatch's case, regulators required independent audits, BSA upgrades, and stronger board oversight. Quaint Oak was mandated to enhance its third-party risk controls and customer due diligence reviews. These aren’t new, isolated incidents—they’re a continuing signal of the rigor in supervision that’s missing.
In multiple states, regulatory examination reports highlighted weak oversight structures, outdated risk frameworks, and missing documentation related to KYC.
Regulators are being direct: sponsor banks cannot outsource compliance. Fintechs are extensions of a partner bank’s footprint. Missteps from fintechs fall on the bank.
This regulatory perspective is about forcing accountability across the lifecycle of bank-fintech engagements — most notably models where banks have limited visibility into the operations OR customer support practices of fintech partners.
And then there’s the reputational risk. Data breaches in bank-fintech partnerships can drag banks into negative headlines and even litigation.
Going forward, regulators are expected to increase rigor in examinations, requests for compliance reporting from sponsor banks, and get granular with fintech program reviews.
This enhanced scrutiny is the new normal for the financial services industry in 2025.
New Priorities for Regulators in Bank-FinTech Partnerships
In 2025, banking regulators expect sponsor banks to:
Conduct enhanced due diligence on fintech partners;
Enforce real-time monitoring and transaction controls;
Require board-level visibility into partner activities;
Integrate fintechs into bank-led AML programs;
For fintech partners, the expectation is to (i) mature internal risk & compliance functions, (ii) hire personnel experienced in BSA, and (iii) develop/maintain robust onboarding and user monitoring.
What does an elevated risk collaboration between banks & fintechs deliver? A unified ‘compliance front’ in which the bank-fintech relationship resembles a holistic entity to regulators. No more hands-off compliance model for banks.
Risk reviews should be tailored to each fintech partner—no cookie-cutter approach. This should include scenario-based transaction testing, model validation, tracking of customer complaints, and reporting suspicious activity.
Banks must also demonstrate how internal systems are reviewing these functions. Compliance dashboards are an effective start — consolidating alerts, onboarding metrics, and real-time ledger data from all fintech partners & programs into a single source of truth. Compliance committees can then review daily/weekly activity and respond quickly to any concern right away.
For fintechs, the expectation from regulators (passed through from banks) is for them to wear ‘bank hats’ in terms of risk management — even if they’re unlicensed. In some examinations, banks have started to bring in a fintech’s compliance officer to speak about KYC, audit controls, staff training, and API logs.
The compliance bar is higher for these partnerships. Stakeholders unwilling to meet this elevated expectation will face penalties such as shutting down sponsorship programs or higher capital requirements.
The New Operational Lift from Fintechs
If proper management is lacking, these partnerships can quickly become burdensome for fintech partners due to increasing cost & complexity.
Compliance & operational efficiency can no longer be a post-launch afterthought. Investment (budget, expertise, tools) must be made from the start — a condition that not all fintech startups are ready to commit to.
Top operational challenges in 2025:
Aligning fintech front-end (user experience) with bank risk expectations & oversight;
Shared monitoring systems & alerts — viewable by both the bank & fintech;
Ensuring contract terms, service level agreements, customer communication, and data flows align with shared responsibilities;
Contractual agreements are now showing updates for dispute responses, information sharing, data ownership, and system uptime. Mandatory quarterly audits and assigning fintech staffing for regulatory reviews are recurring conditions.
Fintechs must present internal policies for fraud prevention, user screening, and complaint management.
The most ‘buttoned-up’ partnerships will have quality tech stacks, detailed risk management policies, and transparent workflows from Day 1.
Industry Maturity in 2025
Bank-fintech partnerships aren’t going away — but they do need to be revamped this year.
Expect to see a continuation of what we saw in 2024:
A narrowing of sponsor banks that are actively seeking fintech partners;
Fewer program launches with a bank emphasis on fintech/enterprise partners that already have a customer base and established product in market;
Compliance support partners & tools expanding the tri-party relationsip (fintech, bank, end-user) to four parties;
Sophisticated sponsor banks will differentiate themselves with technical & compliance integrations. This can come in the form of partnering with top-tier BaaS providers that deliver a full-stack infrastructure & support ecosystem — bank-approved KYC workflows, dashboard for transaction screening, reporting, audit, case management trails, and insights into improving partnerships with compliance resilience and revenue growth.
Investors and banking partners will expect sophistication from fintechs as well — understanding compliance metrics, managing incident reports, and improving customer satisfaction scores. Fintechs must show a mindset of “responsible innovation.”
With regulatory policy, the OCC, FDIC, and other agencies may collaborate on guidance that explicitly defines responsibility in bank-fintech partnerships. We may also see the introduction of a framework for sponsor banks and partners.
Unfortunately, US banks may stop supporting international fintechs this year due to regulatory pressure in minimizing high-risk partnerships. With so much pressure on domestic-only programs failing to meet compliance standards, international money movement and non-US users adds further complexity that banks don’t seem ready for in 2025.
Overall, this is the year that filters out banks, fintechs, and investors who are committed to sustainable financial programs — from those looking for shortcuts & speedy market entry.
If you're building or managing a fintech partnership, now is the time to assess your compliance & risk framework, tech stack & providers, and overall model fits what’s expected in 2025.
🙏 Thanks for being part of the FinTechtris 🌎 community!
For 7+ years of industry content, 📚 visit FinTechtris’ library of articles.
Interested in a new Partnership (Content or Referral)?
We can host your company’s content with sponsored articles, embed referral links for lead generation, and expand visibility/branding for your upcoming event.
🤝 Submit the CONTENT PARTNER / REFERRAL PARTNER form (less than a min).
1:1 insights available for founders, operators, product/exec teams —>
📈 In need of Go-to-Market (GTM) strategies, bank/vendor reviews, product design playbooks, program management toolkits, or outbound planning? Let’s collaborate!
Please fill out our SURVEY (it takes 1-2 min) and we’ll respond within 24 hrs.