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Insights and Expertise

laws and regulations, just as if the bank were to
perform the service or activity itself [emphasis added].
A community bank may engage an external party to Unlock Your
conduct aspects of its third-party risk management.
However, the bank cannot abrogate its responsibility to
employ effective risk-management practices, including Growth Potential
when using a third party to conduct third-party risk
management on behalf of the bank" (see https://bit.
ly/3zbSmga)." With a BCP Loan

Regulators do not care about the indemnity agreement
a bank has with a fintech. To effectively manage third-
party risk, banks need to either automate or raise their
costs to their third-party partners.

Here’s where opportunity exists. If a fintech can work
to align its processes with its partner bank and create
a shallow footprint, the bank will be more apt to
provide favorable financial terms. Moreover, some of
the compliance work could be shifted to the bank—and
banks have historically managed compliance better.

What does this look like?
To employ efficient compliance practices, partners
should seek banks with existing offerings that are
aligned with the near-term road map. If you are
intending to make emergency loans funded through
original credit transactions (OCT), source a bank that
is experienced in both small consumer lending and
OCT transactions. For too long, fintechs have sought
banks that are willing to support their mission at the
lowest cost, without conducting the investigation to
understand the impact. Although it will take more
time, vetting banks for their ability to assist a fintech
in automating its compliance will shave time off every
deliverable. Products will be innately less expensive.
Doing so is a process. Fintechs will need to undertake a
full evaluation of a bank’s capabilities, security, third-
party oversight and technical sophistication, but in
doing so, the fintech will end up much further ahead
on every subsequent offering.

Note: Please Join me along with fellow panelists, Peter BOCA
Tapling and Vlad Sadovskiy, and moderator Dave CAPITAL
Morris at the Midwest Acquirers Association's annual PARTNERS
meeting, in downtown Chicago, July 24 to 25, 2024, as
we take a deeper dive in regulatory trends and the
impact on revenue.
Get a loan from $100,000 to

As founder of Humboldt Merchant Services, co-founder of Eureka $5,000,000 for your ISO today
Payments, and a former executive for such payments innovators
as WePay, a division of JPMorgan Chase, Ken Musante has experi-
ence in all aspects of successful ISO building. He currently provides
consulting services and expert witness testimony as founder of Napa
Payments and Consulting, www.napapaymentsandconsulting. Call Now: 844-531-4957
com. Contact him at kenm@napapaymentsandconsulting.com bocacapitalpartners.com
707-601-7656 or www.linkedin.com/in/ken-musante-us.

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