Action Items

  • Review our In-Depth: 10 Legal Considerations When Offering Banking-as-a-Service ("BaaS").
  • Board & Senior Management Education. Educate your Board and Senior Management about BaaS issues.
  • Infrastructure & Operations. Evaluate your infrastructure, operations, Compliance Management System (“CMS”), and existing third-party agreements.
  • FinTech Due Diligence. Perform comprehensive due diligence on potential FinTech BaaS clients.
  • Continuous Evaluation. Continually evaluate your BaaS operations, regularly review and revise your program management agreement, and other third-party agreements. Prepare for your FinTech-related examination and promptly address any issues.

What is "BaaS?"

BaaS allows banks to offer FinTechs and their customers access to regulated bank products — such as federally insured deposit accounts — and is transforming banking by allowing banks to serve and profit from this market. However, BaaS involves operational, reputational, and regulatory risk if not properly conducted.

Rapidly evolving financial technology and regulatory attitudes are increasing the demand for banks to provide BaaS to FinTechs. BaaS is generally an end-to-end process that allows FinTechs to connect with banks’ systems, so they can build banking offerings on top of the banks’ regulated infrastructure, and access federal deposit insurance. BaaS is an extension of open banking, in which a bank opens its application programming interface (“API”) to a third party for data or functionality access. BaaS can also increase a bank’s deposit base and non-interest income if done correctly.

Recently, FDIC Chair Jelena McWilliams commented about bank and FinTech partnerships at the Money 20/20 Conference:

The last few years have shown that banks and FinTechs can not only coexist but coexist in a symbiotic union. There is an opportunity for FinTechs to provide something that the banks are unable to do in as agile and technologically advanced [an] environment. There's an opportunity for banks to expand their offerings and customer base and services through the FinTech.1

1 See https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/55258773

Top 10 Considerations

Here is an overview of our "10 Legal Considerations When Offering Banking-as-a-Service." Click here to review each step in more detail: 10-legal-considerations-when-offering-baas:

  1. Board & Senior Management Education/Involvement
  2. Bank Infrastructure
  3. Policies & Procedures
  4. Third-Party Relationships
  5. FinTech Due Diligence
  6. The Program Management Agreement
  7. BSA/AML Expectations
  8. Operational
  9. FinTech Examinations
  10. Exit Strategy

We Can Help You

Over the last few years, we have helped develop BaaS programs for our clients. Whether providing training to Boards and employees, assisting with policies, procedures and program management agreements, interacting with regulators and the bank’s vendors, addressing practical concerns and advising about FinTech, we can help your bank successfully develop, manage and grow BaaS.

Please contact us if you are considering offering BaaS, or if you want to discuss how to develop and leverage your existing BaaS relationships.

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