"When you look at partner banks, the risk relationship kind of breaks down," said Konrad Alt, co-founder of Klaros Group, which advises banks and fintechs on compliance and risk. He highlights that as banks partner with fintechs, the confusion about roles and responsibilities complicates risk management. This environment forces both banks and fintechs to redefine partnerships and create more stable, direct relationships. The present reorganization aims to clarify this risk dynamic which has become essential amidst new regulatory demands and public failures.
"The banking industry wasn't ready to have that direct relationship yet," says Sara Seguin, Fraud and Identity Advisor at Alloy, reflecting on the recent shift towards direct bank-fintech partnerships. She emphasizes that many banks lack the foundational infrastructure and technology to manage these direct partnerships effectively, ultimately complicating oversight and control. This misalignment points to the need for banks to better prepare for collaboration with fintechs.
Seguin further notes, "From a bank perspective, not all of those programs have been fully built out, or maybe they don't have the technology in place to not only have that oversight, but then also have control." This quotes reveals a significant challenge for banks in adapting to direct fintech partnerships, raising questions about compliance and operational capacity.
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