Financial collaborations between banks and fintech firms could face increased scrutiny, potentially stalling innovation in the Fintech sector, according to industry experts.

In the ever-evolving world of banking and technology, the regulatory landscape for bank-fintech partnerships is undergoing significant changes. These developments aim to close potential gaps before crises occur, ensuring transparency, compliance, and risk management are at the forefront of these collaborations.

Recent updates from the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, and the Office of the Comptroller of the Currency (OCC) have intensified the examination of "For Benefit Of" (FBO) accounts used in these partnerships. The focus is on clarifying deposit insurance coverage and operational transparency to protect consumers and maintain trust. They have also issued a Request for Information (RFI) to collect industry input on the risks and safeguards in bank-fintech arrangements, signalling imminent regulatory action.

Compliance expectations for these partnerships include adopting a compliance-by-design approach—integrating regulatory requirements early in product development—and continuous regulatory monitoring and stakeholder education to adapt swiftly to the evolving fintech landscape. This approach is increasingly critical as fintechs incorporate advanced technologies like AI and as embedded finance expands.

Third-party risk management has become a central concern as banks deal with more vendor relationships including fintechs. Effective oversight now requires thorough due diligence, ongoing risk assessments, vendor financial and operational stability evaluations, strict cybersecurity controls, well-defined contract terms outlining compliance responsibilities, and robust business continuity plans.

Regulators are also focusing on preserving flexibility in regulatory frameworks such as the Community Reinvestment Act (CRA) to accommodate unique bank-fintech business models, especially regarding community impact and strategic compliance plans.

Lastly, broader regulatory trends include stronger enforcement measures on fair banking practices, increasing scrutiny on banks’ decision-making processes to avoid discriminatory debanking, and an emphasis on balancing access obligations with anti-money laundering compliance within fintech partnerships.

In summary, regulatory oversight of bank-fintech partnerships in 2025 involves:

Intensified focus on FBO account transparency and deposit protection, driven by the FDIC, Fed, and OCC.
Demand for compliance-by-design and ongoing regulatory monitoring to embed and maintain compliance from product inception.
Heightened third-party risk management standards covering vendor due diligence, cybersecurity, contracts, and governance.
Preserving regulatory flexibility for bank-fintech strategic plans to meet community and CRA goals.
Growing regulatory enforcement on fair banking and anti-discrimination compliance impacting partnership operations.

These trends signal that compliance responsibilities in bank-fintech partnerships now require proactive, well-documented, and dynamic risk management frameworks responsive to evolving regulatory expectations and emerging risks.

Yossi Leon, chief technology officer at FIA Tech, stated that increased regulation would bring new costs and affect "build-versus-buy" considerations. Meanwhile, Donna Murphy, deputy comptroller for compliance risk policy at the OCC, believes a cautious approach to innovation is necessary from banks.

Last week, Bloomberg Law reported that the FDIC plans to issue a proposal to address the users' balances disputes in bank-fintech partnerships. This proposal is in response to the Synapse bankruptcy case, where more than 100,000 customers were locked out of accounts with partner banks, due to disputes over users' balances.

As these regulatory changes unfold, it is essential for banks and fintechs to stay informed and adapt their strategies to comply with these evolving requirements to ensure a secure and sustainable future for bank-fintech collaborations.

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