Streamlining Third-Party Due Diligence for Banks & Fintechs

Members of the Alloy Labs Alliance, along with leading consulting firm Crowe, announce a guide to standardize third-party due diligence to build and maintain effective, compliant partnerships between banks and fintechs and other third parties.


Banks are expanding the number of technology providers they utilize, as well as the nature of their relationships as they expand into new areas, such as Banking-as-a-Service and embedded finance. Many of Alloy Labs’ member banks noticed they each implemented regulatory guidance in slightly different ways. “Acting Comptroller of the Currency, Hsu, has been very clear that complexity often creates risk,” said Jason Henrichs, CEO of Alloy Labs, “this guide doesn’t replace regulation, it brings best practices to implement oversight that doesn’t cut corners but also doesn’t impede progress.”


The group’s work was broken into eight different streams, covering categories ranging from business continuity and incident reporting, to operational resilience and best practices to assess subcontractors, with member banks each rolling up their sleeves to share their learnings and debate best practices. “Working together is critical to preserve the safety and soundness of the financial system while promoting responsible innovation,” said Clayton Mitchell, Managing Principal Fintech at Crowe.



Nathan Quinnell, President at Prevail Bank, and leader of one the eight workgroups added, “Alloy Labs continues to grow valuable relationships with fintechs that meet niches or target areas that bank customers desire. Being in on the ground floor and helping guide the fintechs in the direction that banks need is essential to truly offer a customized, successful solution. One of those needs is a standard compliance and risk management review process. This guide will help to establish a process so that the bank and the fintech are in alignment."


The executive summary is available today and multiple sections will be released in stages over the course of 2023.


Free Resource

Alloy Labs & Crowe have made the Executive Summary and Minimal Acceptable Maturity Model 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.

Contact us if you are interested in participating in any of the workstreams to contribute to this industry project.