Using Compliance for Stronger Bank-Fintech Partnerships

The stakes are higher than ever for bank-fintech partnerships. 

With increased scrutiny from regulators like the Federal Deposit Insurance Corporation (FDIC), banks are under pressure to thoroughly vet fintech partners and continuously monitor them to ensure they don’t introduce compliance risks. 

For fintechs, this means demonstrating not just initial compliance but an ongoing commitment to regulatory readiness. Falling short can result in delayed partnerships, regulatory enforcement, or even termination of existing collaborations.

To help fintechs and banks navigate these challenges, we sat down with Kimberly Monty Holzel, a Partner at Goodwin and former CFPB examiner, and Ethan Singleton, Managing Principal at FS Vector and a compliance strategy expert. 

We discussed how fintechs can build operational compliance programs to meet today’s higher standards and secure bank partnerships and how banks can effectively vet, monitor, and manage fintech partners to minimize risks and maintain regulatory compliance.

What the FDIC’s increased scrutiny means for fintech due diligence

The FDIC has intensified its scrutiny of bank-fintech partnerships, focusing on how banks address potential risks posed by their fintech partners before they become problems. 

For fintechs, this increased oversight is a clear signal to prioritize compliance early in their growth journey.

Banks want fintechs to be well-prepared before partnerships even begin. That means knowing the product inside and out and having a clear compliance strategy in place. 

Fintechs often find the due diligence process frustrating due to the extensive requirements, says Kim, but these steps are necessary to avoid future regulatory scrutiny.

There can be frustration that getting a bank partner takes so long, but it’s very necessary for a long-term, functioning relationship that isn’t later scrutinized or terminated by regulators. 

 Kimberly Monty Holzel

To succeed in due diligence, fintechs should:

• Ensure product design is solid and objectives are clear. Banks need to see that you’ve thought through every regulatory angle.
• Do their homework by identifying all relevant regulations and demonstrating how they plan to comply, particularly with regulations like BSA/AML, UDAAP, and other consumer protection laws.
• Be able to show operational readiness. Banks want to see not just compliance policies on paper but proof of how these policies are operationalized through technology, staffing, and internal controls.

Today’s compliance expectations are significantly different from a few years ago.

Three years ago, you might have had a due diligence conversation just to the extent of policies and procedures going back and forth. Now, it’s taking the policies, operationalizing them, and then showing the bank during the diligence process that you’re ready to go and have an MVP [minimum viable product] of a compliance program before they give you the keys to their charter.

Ethan Singleton

This shift reflects regulators’ increasing focus on real, actionable compliance programs rather than surface-level documentation. 

Banks are now looking for fintech partners who can show how policies are operationalized, meaning they expect detailed plans for implementation, testing, and ongoing monitoring. 

Fintechs need to prove they have the right personnel, technology, and workflows in place to ensure compliance in day-to-day operations.

Are fintechs keeping pace with compliance demands?

Over the past few years, fintechs have been forced to adjust to greater regulatory pressure, but are they keeping up? The short answer: It depends.

Most fintechs recognize the importance of compliance and are becoming more proactive.

A lot of fintechs realized that they have to be more compliance-minded than anybody was even a year or two ago. If they want to keep their existing bank partnership or get a new one, that is just the environment we live in now, and it’s a necessity.

Kimberly Monty Holzel

However, many fintechs—especially new players—still struggle to allocate the necessary resources. 

One common mistake for fintechs is over-relying on middleware providers to handle compliance. 

While outsourcing certain functions like KYC (Know Your Customer) or AML (Anti-Money Laundering) can be helpful, fintechs can’t fully offload their responsibilities.

Regulators hold both banks and their fintech partners responsible for ensuring that outsourced functions are effective and compliant. If a third-party provider fails to meet regulatory expectations, the fintech (and the bank) can be held liable.

Fintechs must maintain internal teams capable of monitoring vendors and addressing issues proactively. Without these safeguards, they risk regulatory scrutiny and potential enforcement actions if compliance gaps go unchecked.

For early-stage fintechs, deciding how much to spend on compliance versus growth can be challenging. There’s not a one-size-fits-all program, but there is always a known expense for compliance.

There is a known expense for compliance. Whether you’re taking it in-house,  you’re relying on middleware to do some of the program management and run some of the compliance, or maybe even outsourcing some of those activities to a managed service firm. But that expense is going to be there, no matter what.

Ethan Singleton

Ethan suggests a scalable approach:

• Start lean: Early-stage fintechs don’t need a full-scale compliance program from day one. Focus on key areas like transaction monitoring and disclosures.
• Outsource where it makes sense: Middleware providers can help reduce initial costs, but fintechs should avoid complete reliance.
• Invest in internal oversight: As fintechs grow, they need to build internal teams to oversee vendors and monitor compliance in-house.

What should banks look for in fintech partners?

The OCC’s 2025 Supervision Operating Plan emphasizes that banks must carefully vet potential fintech partners and continuously monitor them throughout the partnership. 

It specifically mentions how examiners will assess “the effectiveness of banks’ risk management throughout all stages of the third-party risk management life cycle, particularly the  rigor of risk management practices for third-party relationships that support a bank’s critical activities.” 

So, what exactly are banks looking for during this process?

Financial Stability: Banks need to understand a fintech’s financial health and will often ask how much capital the fintech has and how long its runway is.

If they have runway that lasts, say, 6 months, that’s really not a viable option for a bank partner to say, ‘That’s enough funding for us to get comfortable that they’re going to be able to launch this project and drive revenue and actually get to the point of profitability.

Ethan Singleton

Vendor Management: Banks are increasingly focused on “fourth-party risks,” which arise when fintechs rely on their own vendors (such as affiliates). Banks want assurances that these vendors won’t introduce additional risk.

We have a lot of understandable fear around taking responsibility for fourth parties, that the fintech is going to delegate some of their obligations to, and that’s very scary to a bank because the regulators expect the bank to be able to oversee the entire program, including anybody that they’ve delegated to.

Kimberly Monty Holzel

Scalability and Growth: Banks must consider whether they can handle a fintech’s growth if it turns out to be wildly successful. Banks will also evaluate whether they can support new products the fintech may want to launch later, such as credit cards or loans.

Effective consumer communication is a joint responsibility

Both fintechs and banks share the responsibility for ensuring that disclosures, marketing materials, and product information is accurate, transparent, and easy for consumers to understand. 

Any discrepancies between what is marketed and the actual product or service can lead to compliance violations and regulatory enforcement.

Fintechs must establish internal processes for reviewing all consumer-facing materials before they’re published, including advertisements, product pages, social media posts, and onboarding materials. This involves ensuring that legal and compliance teams are actively involved in the review process to prevent the use of misleading or incomplete information.

One particular area of concern is disclosures related to fees, interest rates, or promotional offers. Without careful review, these can easily be misrepresented, creating the potential for compliance violations. 

Even seemingly small changes to approved materials—such as an added line of promotional text—can result in discrepancies if they’re not reviewed again by compliance teams.

Many fintechs and banks are finding success by fostering close collaboration between marketing and compliance teams. Historically, these departments worked in silos, but regulatory demands have forced them to coordinate more closely. 

Marketing teams need to understand the regulatory risks, while compliance teams must balance oversight with allowing creative, effective messaging.

At PerformLine, we’ve also seen that marketing teams are increasingly absorbing some compliance costs, as ensuring compliant messaging is crucial to effective outreach.

PerformLine’s technology provides a solution to this challenge by automating the review of marketing content across digital channels. This includes monitoring websites, social media posts, emails, and affiliate marketing materials for inconsistencies, outdated terms, or missing disclosures. By flagging potential issues automatically, fintechs and banks can address them before the content reaches consumers and regulators.

Compliance as a competitive advantage

The mindset around compliance has changed in recent years. It’s no longer just seen as a box to check, but is increasingly recognized as a powerful driver of business growth and a key competitive advantage.

First and foremost, having a robust compliance program is critical to launch a product into the market.

If you even want to get your product off the ground, you need a bank partner. You probably need other third parties involved, and they will not want to work with you if they don’t have trust in your compliance program. And so, having that from the get-go is really important just to get your product off the ground.

Kimberly Monty Holzel

Another critical advantage of compliance is gaining consumer trust, which ultimately leads to business growth. 

There’s really, I think, a direct correlation between having satisfied customers, which can be very much related to the function and operational effectiveness of your compliance program, and that actually leads to business growth.

Ethan Singleton

There seems to be a lot of distrust among consumers, says Kim. First, it was with big banks. Now, it’s with big tech. If consumers see negative news about a particular company, it’s going to drive a lot of business away.

A well-executed compliance program ensures that companies consistently meet consumer expectations, reducing reputational risks and fostering long-term loyalty.

Here are a few other ways that compliance is a competitive advantage for fintechs:

• Faster partnerships: Fintechs that can demonstrate well-documented and operationalized compliance programs are more likely to pass banks’ due diligence processes quickly. This accelerates the time it takes to form partnerships, helping fintechs bring their products to market faster.
• Fewer regulatory hurdles: Regulatory enforcement can significantly delay product launches or expansions, creating roadblocks to growth. By building compliance into their core operations, fintechs can avoid these disruptions and maintain steady momentum.
• Stronger investor confidence Investors are more likely to back fintechs that demonstrate long-term viability, and compliance is increasingly seen as a marker of that stability. Robust compliance programs signal operational maturity, which is essential for attracting and retaining investors.
• Launching new products: Fintechs with proven compliance track records can more easily expand into new product areas, such as offering credit products or adding new payment features, with fewer regulatory obstacles.

Ultimately, fintechs that embrace compliance as a core part of their strategy can gain a powerful competitive edge, turning what many view as a regulatory burden into a strategic asset that drives growth, builds trust, and opens doors to new opportunities.

How PerformLine supports banks and fintechs in marketing compliance

By offering automated marketing compliance solutions, PerformLine helps both banks and fintechs monitor, detect, and remediate risks across marketing channels before they become regulatory liabilities. 

With comprehensive coverage of marketing assets such as websites, emails, social media posts, and affiliate networks, PerformLine ensures that all consumer-facing communications remain accurate, compliant, and up to date.

Why PerformLine?

• Automated monitoring across multiple channels ensures nothing slips through the cracks, reducing manual review burdens on compliance teams.
• Real-time alerts and remediation tools allow organizations to identify and fix issues quickly, maintaining consumer trust and regulatory alignment.
• Audit-ready documentation provides proof of compliance efforts, demonstrating to regulators that risks are being proactively managed.

Whether you’re a fintech scaling your operations or a bank managing multiple third-party relationships, PerformLine’s technology ensures you stay ahead of evolving regulatory demands while safeguarding your brand and customers.

Interested in learning how PerformLine’s compliance solutions can help your organization? Schedule a demo.