As a fintech, you spend months preparing for a sponsor bank relationship. There’s pricing to review, integration requirements to evaluate and diligence checklists to work through.
You may think you can get a sense of your future working relationship through calls that run on longer or replies that come back fast. But they barely scratch the surface of what a successful partnership looks like.
The actual test happens during day-to-day operations: Who you can reach at the bank, where oversight sits and how decisions get made after launch.
Who the Fintech Can Reach
A single account shows a spike in volume on a Thursday afternoon. It’s not something that compliance needs to flag just yet, but it’s enough that someone needs to address it before Monday.
Your instinct may be to measure response times from the bank. However, a more useful metric is what the person responding has the authority to do.
A fast reply from someone who has to consult another person at the bank is not the same as getting a complete answer. The real question is whether that authority was delegated long before anything shows up on a seemingly normal Thursday afternoon. A successful partnership means that the person you reach out to has the authority to make the kind of judgment required before Monday.
Who Manages Oversight
A common assumption is that responsibility for compliance follows operational control, or whoever runs the process has to answer for it. Banks work from a different structure because of how the consequences land.
During a routine bank examination, a question comes up about how the program handles a customer verification step. The fintech manages that process on a daily basis, but the bank provides the response to the examiner.
A fintech can rebrand and relaunch when facing a shutdown of their program.
A bank, on the other hand, can face consequences, including consent orders and restrictions on its ability to grow, even for processes it does not directly manage.
The bank sets standards the fintech has to meet while it runs their processes. The bank also reviews how the program is performing on an ongoing basis and maintains detailed records of what the bank reviewed and when.
Standards, reporting, and review histories should live in shared systems, so both sides are working from the same data. When questions arise, the bank can pull from records it has maintained since before the program went live.
How Decisions Get Made
Eighteen months after launch, you want to make a change that's outside the scope of the original agreement. The review itself isn’t the challenge. What matters is whether you're part of the conversation or simply waiting for the decision.
Some banks work through the review with you and discuss what the concern is, what would need to be in place to approve changes, and the reporting or controls that will need to change. Others may simply return with a decision once the review is complete.
The difference between these approaches is based on the structures the bank already has in place. Some banks assess the request against your original program and can approve a new function if it fits inside the existing profile. Another might reassess the underwriting itself, working through what would be needed to support the new function and how the agreement would need to change.
Both options are legitimate. A bank may only need to do a quick assessment, so can give you a decision right away. Or, if a bank needs to reassess the underwriting, there is more to work through and involve you in the process.
What's Next
Your questions about transactions, a question from a regulator, or building something the original agreement never anticipated are all ordinary parts of running a program.
A true partnership means that the structure in place during diligence remains intact during daily operations for years. When assessing a prospective sponsor bank, it’s worth asking questions about what that ordinary Thursday looks like beyond launch.
About the Author
Sarah Li-Cain, AFC® is a business and finance writer with more than a decade of experience. She has partnered with organizations in the banking, fintech and payments industries including American Express, CFO.com and Sovos.
OMBX and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decision. OMBX is owned and operated by OMB Bank.
