Dear Fintech: Reverse Due Diligence on Your BaaS Provider Is Critical

The Banking as a Service (BaaS) sector has faced increased scrutiny in recent years, highlighted by significant enforcement actions taken against multiple BaaS banks. These actions have largely stemmed from issues such as poor risk management, insufficient funds management controls, and violations of fair lending practices, often exacerbated by complex fintech partnerships. As the banking sector navigates this landscape, fintech companies must reevaluate their criteria for selecting banking partners to avoid similar pitfalls.

Michael Hollerich and Opala Dhingra cover the key steps fintechs should take to reduce the unexpected challenges and significant operational stress they can face when trying to partner with traditional banks.