Episode Details

Hey all, Jason here.

I recently partnered with Cable’s Chief Product Officer Katie Savitz to present a Masterclass at the Empire Fintech Conference during NY Fintech Week. We profiled six recent developments impacting Banking-as-a-Service and how stakeholders can use technology to respond.

If you weren’t able to attend (or just need a refresher!), this podcast/post combo is for you!

(And extra great timing, as Cable today announced it raised an $11M Series A to automate effectiveness testing of financial crime controls!)

Six Key Developments in Banking-as-a-Service

The U.S. banking system is experiencing its greatest stress since the 2008 Great Financial Crisis and regulators are seeking to address risks being revealed. BaaS may make the banking system more resilient, but it also introduces new risks. Six recent developments shed light on how BaaS may evolve going forward.

* OCC Office of Financial Technology. One explicit mandate of the OCC’s Office of Financial Technology – recently formally established and led by Prashant Bhardwaj – is to support “high-quality supervision of bank-fintech partnerships,” which portends continued regulatory scrutiny, but also opportunity for industry engagement with regulators.

* OCC 2023 Bank Supervision Operating Plan. Further signaling the OCC’s increased focus on BaaS, the agency’s 2023 supervision operating plan calls for specific focus on third-party risk management and highlights BSA/AML risk.

* Acting Comptroller Hsu 2022 TCH+BPI Conference Remarks. Acting Comptroller Hsu’s speech specifically addressed the growth of BaaS operating models. Hsu expressed concern about the growing complexity associated with BaaS and reiterated the primacy of “safety and soundness” concerns, while acknowledging opportunities from technological innovation.

* November 2022 U.S. Treasury Department Report on Non-Bank Firms in Consumer Finance Markets. The Treasury Department report specifically flagged “new risks to consumer protection and marketing integrity” from fintechs and called for enhanced supervision of bank-fintech partnerships.

* CFPB Invokes Dormant Authority to Examine Non-Bank Companies. While the CFPB is focused first and foremost on consumer protection, it has shown a willingness to use its authority to supervise non-bank entities that may pose a risk to consumers, potentially including non-bank fintechs and platforms.

* OCC-Blue Ridge Bank Agreement. The OCC’s formal agreement with Blue Ridge – arguably the first major BaaS enforcement action – provided a wealth of detail about regulatory scrutiny of risks in bank-fintech partnerships, and areas of financial crime compliance tech stack