Will federal guidance have ‘chilling effect’ on banking-as-a-service?

Interagency guidance on third-party relationships released in June has banking-as-a-service in its sights, and could cause enough confusion to slow adoption. So says former FDIC chair Jelena McWilliams. Meanwhile, other experts warn that the guidance is a sign of increasing scrutiny of all fintech partnerships.

Federal regulators have been ramping up scrutiny of banks’ third-party relationships for years, but the emergence of banking-as-a-service and other fintech relationships intensified debate and produced new interagency guidance in early June. As the guidance nears the six-month mark, assessment of its impact is highly divergent — from “a chilling effect” on BaaS deals to a workaday belief that the document underscores the responsibilities of both banks and fintechs as they increasingly work together.

The June document, “Interagency Guidance on Third-Party Relationships: Risk Management,” was jointly issued by the Federal Reserve, the Comptroller of the Currency and the Federal Deposit Insurance Corp.

Two sessions at the November policy summit of the American Fintech Council exposed a wide assortment of viewpoints on its guidance. One featured a former FDIC chair and the other a panel of financial institutions, consultants and other experts on bank-fintech partnerships.


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