TLDR: Regulators are stepping up oversight of fintech partnerships and banking-as-a-service (BaaS) providers, following a surge in enforcement actions, consent orders, and heightened scrutiny in the US over the last year and a half. Financial institutions that offer BaaS to fintech firms have accounted for 13.5% of severe enforcement actions issued by federal bank regulators in 2023. Blue Ridge Bankshares, Cross River Bank, and First Northwest Bancorp, are among several banks that have faced regulatory action for failing to correct problems related to their fintech partnerships.
Meanwhile, American Express is making efforts to expand its products and has become more involved in fintech. The company is focusing on building new platforms and investing in promising technology companies, as well as making strategic acquisitions. American Express has also successfully increased its appeal to younger generations and dispelled the notion that its brand is only for the ultrawealthy.
Additionally, community banks are deepening ties with fintech hubs, which are geographic areas that provide resources and support for fintech founders. According to banking industry experts, a thriving fintech hub requires access to venture capital funding, incubators and accelerators, universities with relevant programs, and innovation-friendly regulations. By establishing fintech hubs, community banks hope to attract fintech firms and drive innovation in the industry.
Bank regulators will have to keep up with technology advancements by hiring top talent from the private sector and paying more for senior talent. This is to ensure that they have the necessary expertise to regulate banks and fintech companies effectively. As the world becomes increasingly tech-focused, regulators need to be proactive in understanding and overseeing technology-related issues.
