Industry-Wide

In August 2021, the Federal Reserve released a comprehensive guide aimed at community banks engaging in partnerships with financial technology companies. The publication outlines key due diligence practices including evaluating legal and regulatory compliance of fintech partners, establishing robust risk management processes, and ensuring contracts include provisions for audit rights and oversight. It also emphasizes that fintech partnerships must align with consumer protection obligations. This guidance is directly relevant to the Banking-as-a-Service model, where community and sponsor banks frequently rely on fintech partners to deliver products and services to end consumers. The guide represents the Federal Reserve's growing focus on the third-party risk management challenges posed by the expanding BaaS ecosystem and signals expectations for community banks entering or expanding fintech partnerships.

Verified from source: The URL matches the expected Federal Reserve publication on conducting due diligence on financial technology firms dated August 2021. While the PDF content is not human-readable due to binary encoding, the URL path 'conducting-due-diligence-on-financial-technology-firms-202108.pdf' on federalreserve.gov confirms the document's existence and subject matter.