May 2, 2017 - Barack Ferrazzano Client Alert

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Client Alert Update: FinTech & Bank Partnerships

Action Items

If your bank is considering partnering with a FinTech, evaluate the following:

• Will it fit your bank’s strategic plan?
• How well do you know your FinTech partner?
• Do you understand the deal?
• Will the deal pass regulatory and legal muster?

Recently, the FinTech business model shifted from disrupting banks to collaborating with them, whether in payment services, e-lending, customer experience, data analytics, insured depository support, or in other areas. Consequently, our Financial Institutions Group attorneys are working on a wide range of partnerships and related agreements between banks and FinTechs. Additionally, our clients and our attorneys are receiving more and more inquiries from FinTechs wanting to partner with banks. From our experiences, and as reiterated at the recent FinXTech annual summit in New York City that our attorneys attended, there are four main considerations for partnering with a FinTech. While partnering with a FinTech can be accretive to a bank and fit squarely into the bank’s strategic vision, banks should consider the following when evaluating any potential FinTech partnership or agreement:

• Will it fit your bank’s strategic plan?
  While FinTech partnerships can be very positive for your bank, the first question is to determine whether the partnership fits your bank’s strategic vision and innovation plan.
• How well do you know your FinTech partner?
  FinTech entities range from early-stage start-ups to more established organizations. Banks need to perform due diligence on their potential FinTech partners to determine if they are an appropriate partner for your bank.
• Do you actually understand all aspects of the arrangement?
  FinTech agreements are technical by their nature. Bank senior management and their boards should thoroughly understand the scope of services and pricing before entering into a partnership.
• Will the deal pass regulatory and legal muster?
  FinTechs, by their nature, are technology companies, sometimes bereft of comprehensive bank legal and regulatory experience. Thus the legal and regulatory implications of any partnership should be comprehensively analyzed and vetted.

We Can Help You

Currently, our Financial Institutions Group attorneys are working on a wide range of partnerships and related agreements between banks and FinTechs. Please contact us if you are interested in discussing any potential FinTech partnership opportunities.