Regulators are paying closer attention to fintech regulatory compliance in bank-fintech partnerships than ever before. In July 2024, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, and the Office of the Comptroller of the Currency (OCC) issued a joint statement warning banks about risks tied to third-party fintech arrangements, especially in deposit and payment services.1
For leaders and employers navigating this changing environment, understanding why regulators are intensifying scrutiny and how to respond matters deeply. This article explains what the main regulatory bodies are doing, as well as how you can respond to ensure your business remains compliant.
Recent OCC and FDIC Enforcement
For years, banks relied on fintech partners to move faster, launch new products, and reach customers more efficiently. Many of these partnerships expanded rapidly through Banking-as-a-Service models, embedded finance, and digital deposit products. In many cases, fintechs handled customer onboarding, transaction processing, compliance operations, or technology infrastructure while banks remained legally responsible for the outcomes.
Regulators are now responding to the gap between who controls the activity and who carries the regulatory responsibility.
In the past, banks often relied on contractual assurances or periodic vendor reviews. Today, regulators expect banks to demonstrate active, ongoing control over fintech operations that affect customers, deposits, payments, and compliance obligations.
Several specific factors are driving this regulatory shift, each rooted in how quickly fintech partnerships have evolved relative to traditional banking oversight models.
5 Reasons Behind the Shift
Regulators expect banks to manage the risks of fintech partners at least as carefully as they manage their own internal functions. This expectation has legal and supervisory weight, and it drives the recent change in reinforcements.
1. Responsibility for Third-Party Risk Rest with the Bank
In a joint statement, the FDIC, Federal Reserve, and OCC reminded banks that they remain responsible for compliance even when a third party—like a fintech—performs key functions. The statement highlighted safety and soundness, compliance, and consumer concerns tied to third-party arrangements, including bank-fintech relationships.1
2. Operational and Compliance Risks from Outsourcing
Regulators have repeatedly pointed out that when banks hand over control of customer interactions or compliance processes to fintechs, it can weaken oversight. The joint statements emphasize that fragmented operations, compliance gaps, and delayed access to records all increase risk if not tightly monitored by the bank.2
3. Rapid Growth Strains Bank Risk Management
Many partnerships have expanded faster than banks’ risk and compliance programs can adapt. Supervisors are watching as rapid growth without matching oversight leads to gaps in consumer protection, AML, and KYC controls. American Banker reported that enforcement actions connected to Banking-as-a-Service (BaaS) models have risen, with fintech partner banks facing more scrutiny as their oversight lapses emerge.3
4. Misrepresentation and Consumer Protection Risks
Regulators are concerned about end-user confusion, especially around deposit insurance and other protections. Agencies have warned that customers may misunderstand how FDIC insurance applies when fintech is involved, making clear and accurate disclosures crucial.
5. Enforcement Actions and Consent Orders Show Real Consequences
In early 2024, the FDIC entered consent orders with banks involved in fintech partnerships over safety, soundness, and third-party oversight matters. These enforcement actions reflect real regulatory consequences when compliance and risk management are insufficient.
Actionable Tips for Your Business
Regulatory scrutiny doesn’t mean you should abandon fintech partnerships; it means your company must be intentional about compliance, governance, and talent strategy.
Here are five practical steps you can take:
1. Strengthen Third-Party Risk Management Frameworks
Don’t assume a fintech partner’s controls will protect you. Regulators make it clear that the bank’s own risk management program must monitor, test, and control third-party fintech activities. Establish regular due diligence, risk assessments, and escalation paths to catch issues early.
Read more: Fintech Compliance Challenges
2. Clarify Roles and Responsibilities in Contracts
Explicitly document who is responsible for each compliance function. This should include AML, KYC, customer disclosures, data privacy, and fraud controls. Regulators are focused on who actually owns compliance obligations, and vague contracts can lead to enforcement risk.
3. Build Internal Expertise on Fintech Risk
Having senior leaders and risk professionals who understand fintech products and regulations is critical. Regulators expect banks to have internal subject matter experts who can anticipate changes in how technology affects risk and compliance. Training and hiring for fintech regulatory compliance and third-party oversight must be a priority.
4. Monitor Regulatory Guidance and Respond Proactively
Regulations and supervisory expectations evolve. Stay current with federal bank agency releases, interagency statements, and enforcement trends. A proactive posture reduces surprises and positions your compliance team as a strategic partner to the business.
5. Partner with a Staffing Firm That Understands Fintech Compliance Needs
Hiring the right compliance and risk leadership matters. Specialist recruiters like Madison-Davis help you find experienced professionals who understand both traditional banking regulations and emerging fintech risks. When compliance talent is aligned with business goals, you reduce your regulatory exposure and build stronger partnerships.
Position Your Team for Compliance Leadership
Fintech regulatory compliance is not a temporary challenge. As fintech partnerships grow in scope and complexity, enforcement risk will remain elevated unless banks invest in governance, oversight, and leadership. Regulators will continue to push for clearer risk management, stronger controls, and tighter supervision of third-party relationships.
Success starts with the right people driving compliance strategy and risk management across bank-fintech partnerships.
Work with Madison-Davis to hire the right talent.
When your business needs professionals who can navigate regulatory challenges and lead compliance efforts, Madison-Davis is here to help. We specialize in matching employers with candidates who balance regulatory expertise, fintech experience, and leadership capabilities.
Contact us today to build a team that meets evolving compliance demands.
References
- “Agencies Remind Banks of Potential Risks Associated with Third-Party Deposit Arrangements and Request Additional Information on Bank-Fintech Arrangements.” Office of the Comptroller of the Currency, 25 Jul. 2024, www.occ.treas.gov/news-issuances/news-releases/2024/nr-ia-2024-85.html.
- “US Banking Agencies Are Ramping Up Scrutiny of Bank-Fintech Partnerships.” Skadden, 21 Aug. 2024, www.skadden.com/insights/publications/2024/08/us-banking-agencies-ramp-up-scrutiny.
- “Fintech Partner Banks Facing ‘volatile Mix’ of Supervisory Scrutiny.” American Banker, 12 Apr. 2024, www.americanbanker.com/news/fintech-partner-banks-facing-volatile-mix-of-supervisory-scrutiny.
