Members of the Alloy Labs Alliance, in concurrence with leading consulting firm Crowe, LLP, proudly announce the publication of their second iteration aimed to make third-party due diligence more approachable, actionable, and realistic. This initiative ties real world experiences, organizational strategies, and risk appetites to build and maintain effective, compliant partnerships between banks, fintechs, and other third parties.
Now, more than ever, it is crucial for banks, fintechs, and other third parties to prioritize strong communication and due diligence to establish safe, substantial, and resilient partnerships. Following the release of our executive summary to streamline bank and fintech partnerships, the member banks of Alloy Labs, alongside Crowe, LLP, have collaborated once again to develop a detailed guide outlining the key risks and essential elements to launching a successful relationship between financial institutions and third parties.
"This guide is designed for innovative banks operationalizing the Interagency Guidance on Risk Management that was released in 2023. Moving fast is not an excuse.” Jason Henrichs, CEO and Co-Founder of Alloy Labs states.
Recognizing an existing gap in the industry, we’re committed to working together by harmonizing the risk assessment process. In turn, the goal is to empower banks & other financial institutions to react quickly in the case an issue was to arise. Together, we believe it’s time for an industry shift – an era where banks and fintechs thrive by seizing diligent, compliant partnership opportunities, rather than reacting to miscommunication, misaligned expectations, and legacy views of bright-line expectations for due diligence, with compliance leveraged as an excuse against taking a risk-based approach. Our comprehensive guide represents the first stride towards achieving this transformative shift.
We’ve formatted the definitive guide to first redefine how bank-fintech partnerships should be viewed. These partnerships are here to stay for the long term, so it’s vital to implement an organizational strategy to ensure long-term sustainability. As a group, we predetermined six essential sections to include a risk-based approach to enable financial success, operational soundness, mutually beneficial partnerships, and strong regulatory compliance.
"Understanding the "What's important" & "What could go wrong" guidance will provide a clear picture of potential risks in a new partnership. Taking action based on the "What I should do" section builds confidence in the relationship to move forward; knowing that prudent steps have been taken to keep the customer's data safe, thus enables the business to achieve its strategic goals." -Pete Boergermann SVP, Director of Information Security of C&N Bank.
Keith Evans, Vice President & Senior Vendor Manager at First Northern Bank, shares how building the definitive guide has enabled him to successfully implement new procedures at his organization, “we’ve now had the ability to update our vendor management policy and due-diligence process to include fintechs. It’s helpful knowing that we need to do a deeper dive with these companies, as they are just beginning to learn what financial institutions are requiring of them.”
Please contact us if you are interested in participating in any of the work streams to contribute to this industry project.
Free Resource
Alloy Labs & Crowe have made the Third Party Due Diligence Definitive Guide available as a free download here.
Disclosure
These materials are for guidance only and each organization is responsible for compliance with all applicable state and federal regulations. Due diligence may vary depending on the nature of the partnerships and services provided. Users of this guide are encouraged to seek professional guidance.
About Alloy Labs
We are the only consortium of its kind that brings innovation-driven banks together to partner with startups, co-create differentiated solutions, and make strategic investments. Our members take advantage of exclusive network effects to achieve exponential growth. Alloy Labs also operates The Concept Lab, a reverse accelerator that helps member banks cement relationships with fintechs, and the Alloy Alchemist Fund, which invests in early-stage partners. For more information visit our main page here.