You could say Banking as a Service is under siege.
The number of severe enforcement actions BaaS banks received skyrocketed in 2023 to 13.5% of the total. When you consider there are probably only around 100 banks out of 4,800 that are involved in banking as a service, you can see why this number is disturbing.
And this is only those enforcement actions that have been made public, there are likely many more that we do not know about.
There has never been a more challenging environment for those banks looking to provide banking services to fintechs and other non-banks.
Here is what Phil Goldfeder, CEO of the American Fintech Council had to say:
“Responsible innovative banks are increasingly frustrated with the nature of treatment by their supervisors, examiners and regulators who refuse to engage in pragmatic or meaningful dialogue.”
This is the reality that banks and fintech operate in today. There is regulation by enforcement with no clear guidelines on how to operate within the law.
That has to change. Or we risk financial innovation being severely stifled as no one wants to try anything new.
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Small group of banking-as-a-service banks logs big number of enforcement actions
US banks that provide banking as a service to fintech partners accounted for more than 10% of severe enforcement actions issued by federal bank regulators in 2023, an outsized share given that the number of banks partnering with fintechs is small.
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