Banking, Member Exclusive

Banking briefing: Partners in peril

  • BaaS is in trouble. Regulatory storm clouds are gathering and it seems partner banks are about to find it a lot harder to dive into (and maintain) BaaS relationships than they did before. 
  • It seems like BaaS players like banks, middleware companies, and fintechs had time to bloom and are now experiencing a regulation-induced contraction.
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Banking briefing: Partners in peril

BaaS is in trouble. Regulatory storm clouds are gathering and it seems partner banks are about to find it a lot harder to dive into (and maintain) BaaS relationships than they did before. 

What’s going on with BaaS? 

Recently two BaaS-related enforcement actions came out, one which detailed that Blue Ridge bank is now deemed to be in “troubled condition” and second, which stated that Choice Bank violated the Bank Secrecy Act.

In the case of Blue Ridge Bank, regulatory tensions have been brewing for some time: In 2022, the OCC demanded that Blue Ridge Bank better its oversight protocols for third-party fintech relationships. Due to the order, the bank was prohibited from starting new contracts with fintechs or providing any additional products to its current partners.

2024 has not made things any easier for the bank, with the most recent move by the regulators stating that it failed to right the wrongs of its fintech partnerships. However, CEO of Blue Ridge Bank, Billy Beale, says that the OCC’s findings are based on the bank’s activities till June but are not representative of its work since then

So, what has Blue Ridge been doing to right the ship?


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