Banks that operate banking-as-a-service programs are facing heightened scrutiny from bank regulators, as examiners scramble to get a handle on the size and scale of lenders’ partnerships with fintechs, said Konrad Alt, a partner at financial services advisory and investment firm Klaros Group.
Alt, who advises banks and fintechs, said he is noticing an uptick in regulators’ scrutiny of firms that offer BaaS, and expects enforcement actions against firms that provide the underlying banking services for fintechs will be forthcoming.