A Warning for Fintech’s Banking Partners
The fintech industry — those high-tech, often app-based financial services — is big business. The industry, though, depends on a merger of smart technology and a banking infrastructure.
Since starting and operating a bank takes a lot of time and requires a lot of attention to regulatory detail, fintech companies often work with existing banks in a “rent-a-bank” or “banking-as-a-service” model.
This allows the tech app to quickly get to market while providing the bank with a new revenue stream.
Of course, as a new territory, it is (or has been) unclear how banking regulators will deal with the challenges of these new financial services players.
Fintech Lenders Facing New Scrutiny
Turns out, online lions and lending bears charge predatory interest rates
Jason Mikula over at Fintech Business Weekly shares the story of Blue Ridge Bank and a recent regulatory action by the Office of the Comptroller of the Currency (OCC). In short, bank regulator OCC is seeking to rein-in Blue Ridge’s offerings. The move is also seen as a warning to other fintech-bank partnerships about what will and will not be permitted.
Mikula takes a pretty deep dive into all the issues in this area, but here’s a short bit of what he says and an explainer on what that means for fintech-bank partnerships and for consumers:
Perhaps the most shocking element of the agreement is the requirement, as part of its third-party risk management obligations, that Blue Ridge receive the OCC’s sign off (“non-objection”) before onboarding new fintech partners or offering new products/services or conducting new activities with existing partners (emphasis added):
“Prior to onboarding new third-party fintech relationship partners, signing a contract with a new fintech partner, or offering new products or services or conducting new activities with or through existing third-party fintech relationship partners, the Board shall obtain no supervisory objection from the OCC.”