Alloy

"Really good compliance officers help the business push towards smart risk," according to Carta's Chief Compliance Officer Rachel Sapers. 💡 Hear more of Rachel's take in our Risky Business video series, which highlights the lesser known highs and lows of being a risk leader in financial services. https://lnkd.in/dJBqGqqN

In conversation with Rabab Ahsan at Tearsheet, Sara Seguin shared some practical tips for both banks and fintechs engaging in BaaS relationships. 🤝 According to our State of Embedded Finance Report, 96% of sponsor banks now strive for at least a moderate level of control over the compliance programs of their fintech partners in response to the current regulatory environment. https://lnkd.in/d-aG3-NX

Again, Alloy's report on #embeddedfinance and #BaaS is a great view into what's going on in BaaS #compliance. Some of the highlights include: ▶️ 𝗙𝗼𝘂𝗿 𝗶𝗻 𝟭𝟬 𝗼𝗳 𝘀𝗽𝗼𝗻𝘀𝗼𝗿 𝗯𝗮𝗻𝗸𝘀 𝗹𝗼𝘀𝘁 𝗮𝘁 𝗹𝗲𝗮𝘀𝘁 $𝟮𝟱𝟬𝗞 𝘁𝗼 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝘃𝗶𝗼𝗹𝗮𝘁𝗶𝗼𝗻𝘀. Given that stat, it isn't surprising to hear that 80% of the banks said that meeting compliance requirements is challenging. ▶️ 𝗙𝗼𝘂𝗿 𝗶𝗻 𝟭𝟬 𝘀𝗽𝗼𝗻𝘀𝗼𝗿 𝗯𝗮𝗻𝗸𝘀 𝗰𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝘄𝗶𝘁𝗵 𝗳𝗶𝗻𝘁𝗲𝗰𝗵 𝗽𝗮𝗿𝘁𝗻𝗲𝗿𝘀 𝘃𝗶𝗮 𝗮 𝗕𝗮𝗮𝗦 𝗽𝗹𝗮𝘁𝗳𝗼𝗿𝗺. That number is declining, but the industry is still a far ways off from a "direct only" model. This notion of a "direct" model is misunderstood, however. As the report notes: "While BaaS platforms are becoming less common at the contract layer, they are still prominently used as part of the tech layer." (This was a key point in my #Fintech Snark Tank post How To Be(come) A Great Partner Bank In The BaaS Space https://lnkd.in/eKBggUU7 ) ▶️ 𝗧𝗵𝗿𝗲𝗲 𝗶𝗻 𝟭𝟬 𝘀𝗽𝗼𝗻𝘀𝗼𝗿 𝗯𝗮𝗻𝗸𝘀 𝘄𝗮𝗻𝘁 𝘁𝗼 𝘀𝗹𝗶𝗺 𝗱𝗼𝘄𝗻 𝘁𝗵𝗲𝗶𝗿 𝗲𝗺𝗯𝗲𝗱𝗱𝗲𝗱 𝗳𝗶𝗻𝗮𝗻𝗰𝗲 𝗽𝗿𝗼𝗴𝗿𝗮𝗺 𝗼𝗿 𝘀𝗵𝘂𝘁 𝗶𝘁 𝗱𝗼𝘄𝗻 𝗲𝗻𝘁𝗶𝗿𝗲𝗹𝘆. This stat is going to get twisted--it's going to be used without the "slim down" part and people will say that 3 in 10 sponsor banks want to shut their programs down. What does "slim down" really mean? According to the report, a third of the banks surveyed have 11 or more partnerships. Would it be surprising to find that many of them want to weed out some of the more risky and less successful fintechs they've taken on? The split between "slim down" and "shut down" is important here. Wish Alloy had broken that out. ⬛️ Parilee Edison Wang's prediction that we'll see "a consolidation of players, with dabblers exiting the market" is spot on. As I wrote in my Forbes article: "The big banks will get into BaaS. The level of compliance, operational, and technology resources need to get into the BaaS space and grow the business is going to prove too much for a lot of sub-$10 billion banks." Kudos to Tommy Nicholas, Laura Spiekerman, and the Alloy team for a great report. Find it here: https://lnkd.in/eB4VrGSw

According to our State of Fraud Report, 79% of credit unions/community banks lost more than $500k to fraud last year, higher than any other segment surveyed. 😔 Despite challenges with fraud prevention, "credit unions are in a wonderfully unique position because of their ability to put members at the forefront," as Sara Seguin states in the latest episode of the CU 2.0 podcast, hosted by Robert McGarvey. 🎙️ Listen to find out how credit unions and other financial institutions can better fight fraud in 2024. https://lnkd.in/gNj-8tY7

Find our own Sara Seguin speaking at next week's Datos Insights Financial Crime and Cybersecurity Forum alongside experts from MidFirst Bank and Navy Federal Credit Union. 🕵️♀️ This all-star panel will cover the evolution of identity and its role in financial crime prevention, including how to balance fraud prevention and customer experience. 🎤 Mark your calendars for the session on Wednesday, August 28 at 9 am in Charlotte! https://lnkd.in/eTHfuez3

Check out portfolio company Alloy's latest State of Embedded Finance Report for a deep dive into the opportunities and challenges of this booming industry.   Discover how embedded finance drives deposits and revenue and learn about the hurdles slowing down growth.   Download the full report here: https://lnkd.in/eb-aqEjk #embeddedfinance #fintech #innovation

Efficiently managing an embedded finance program can be a challenging task. ⚙️ Earlier this year, we launched Alloy for Embedded Finance, a new solution that helps sponsor bank and fintech clients co-manage risk controls. 🤝 Now we’re launching Audit Access, a new tool that grants sponsor banks and electronic money institutions complimentary access to view their fintech partners’ compliance policies and risk controls within the Alloy platform. Say goodbye to the days of clunky spreadsheets to collaborate with your fintech partners on compliance policies: Alloy’s Audit Access tool is the future. 🚀 Read more about Audit Access in our latest blog post: https://lnkd.in/entQ6uZQ

Again, Alloy's report on #embeddedfinance and #BaaS is a great view into what's going on in BaaS #compliance. Some of the highlights include: ▶️ 𝗙𝗼𝘂𝗿 𝗶𝗻 𝟭𝟬 𝗼𝗳 𝘀𝗽𝗼𝗻𝘀𝗼𝗿 𝗯𝗮𝗻𝗸𝘀 𝗹𝗼𝘀𝘁 𝗮𝘁 𝗹𝗲𝗮𝘀𝘁 $𝟮𝟱𝟬𝗞 𝘁𝗼 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝘃𝗶𝗼𝗹𝗮𝘁𝗶𝗼𝗻𝘀. Given that stat, it isn't surprising to hear that 80% of the banks said that meeting compliance requirements is challenging. ▶️ 𝗙𝗼𝘂𝗿 𝗶𝗻 𝟭𝟬 𝘀𝗽𝗼𝗻𝘀𝗼𝗿 𝗯𝗮𝗻𝗸𝘀 𝗰𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝘄𝗶𝘁𝗵 𝗳𝗶𝗻𝘁𝗲𝗰𝗵 𝗽𝗮𝗿𝘁𝗻𝗲𝗿𝘀 𝘃𝗶𝗮 𝗮 𝗕𝗮𝗮𝗦 𝗽𝗹𝗮𝘁𝗳𝗼𝗿𝗺. That number is declining, but the industry is still a far ways off from a "direct only" model. This notion of a "direct" model is misunderstood, however. As the report notes: "While BaaS platforms are becoming less common at the contract layer, they are still prominently used as part of the tech layer." (This was a key point in my #Fintech Snark Tank post How To Be(come) A Great Partner Bank In The BaaS Space https://lnkd.in/eKBggUU7 ) ▶️ 𝗧𝗵𝗿𝗲𝗲 𝗶𝗻 𝟭𝟬 𝘀𝗽𝗼𝗻𝘀𝗼𝗿 𝗯𝗮𝗻𝗸𝘀 𝘄𝗮𝗻𝘁 𝘁𝗼 𝘀𝗹𝗶𝗺 𝗱𝗼𝘄𝗻 𝘁𝗵𝗲𝗶𝗿 𝗲𝗺𝗯𝗲𝗱𝗱𝗲𝗱 𝗳𝗶𝗻𝗮𝗻𝗰𝗲 𝗽𝗿𝗼𝗴𝗿𝗮𝗺 𝗼𝗿 𝘀𝗵𝘂𝘁 𝗶𝘁 𝗱𝗼𝘄𝗻 𝗲𝗻𝘁𝗶𝗿𝗲𝗹𝘆. This stat is going to get twisted--it's going to be used without the "slim down" part and people will say that 3 in 10 sponsor banks want to shut their programs down. What does "slim down" really mean? According to the report, a third of the banks surveyed have 11 or more partnerships. Would it be surprising to find that many of them want to weed out some of the more risky and less successful fintechs they've taken on? The split between "slim down" and "shut down" is important here. Wish Alloy had broken that out. ⬛️ Parilee Edison Wang's prediction that we'll see "a consolidation of players, with dabblers exiting the market" is spot on. As I wrote in my Forbes article: "The big banks will get into BaaS. The level of compliance, operational, and technology resources need to get into the BaaS space and grow the business is going to prove too much for a lot of sub-$10 billion banks." Kudos to Tommy Nicholas, Laura Spiekerman, and the Alloy team for a great report. Find it here: https://lnkd.in/eB4VrGSw

📰 Hot off the press, Bloomberg Teresa X. did a deep dive on the results of our 2024 State of Embedded Finance Report. Check out the piece below to understand how sponsor banks are balancing the revenue potential of fintech partnerships alongside the costly compliance violations that can result from missteps. “Running a sponsor bank program is inherently complex because you have banks who are highly regulated working with companies that are often new, fast-growing, and creating entirely new ways for consumers to interact with money,” said Tommy Nicholas, chief executive officer and co-founder of Alloy. https://lnkd.in/e7X_P-Vk

Our 2024 State of Embedded Finance Report is now live! This survey of decision-makers at top US sponsor banks gives insight into the revenue potential of these programs and how banks are responding to regulatory scrutiny: 💰51% of sponsor banks’ revenue and deposits are driven by embedded finance/BaaS fintech partnerships 😬 But 80% of sponsor banks find it challenging to meet compliance requirements when it comes to their fintech partnership program 💵 75% of sponsor banks have lost at least $100k and 6% reported losses of $1M or more. 🔎 Going forward, sponsor banks need to have greater oversight of their fintech partners: decision-makers ranked a lack of control over their fintech partners’ policy controls as their top challenge when it comes to meeting compliance requirements Download the full report here for more insights: https://lnkd.in/eb-aqEjk