Blue Ridge Bank set to trim BaaS fintech partnerships down to a “limited number”
Blue Ridge Bank is preparing to whittle its Banking-as-a-Service (BaaS) relationships down to a “limited number” after drawing the attention of US regulators last year.
Blue Ridge Bank to limit BaaS fintech partnerships
Founded in 1893 and based in Virginia, Blue Ridge Bank operates as a community bank serving consumers and businesses across the mid-Atlantic states with banking, lending, and savings products.
During an investor presentation earlier this month, the bank revealed its plans to “reduce its sub-partner exposure to a limited number of core BaaS partners” and promote “a strong commercial focus on strong consumer traction as contracts mature”.
American Banker reports that the company has begun trimming around a dozen of its nearly 50 fintech partners with potentially more to come.
The BaaS business model allows a bank to offer fragmented sections of its services to other businesses, most typically fintechs.
While the model can be commercially rewarding for both participants, it must always adhere to the providing bank’s obligations to its regulator.
In August 2022, the US Office of the Comptroller of the Currency (OCC) flagged Blue Ridge Bank for “unsafe or unsound” business practices concerning suspicious activity reporting, risk governance and IT control, anti-money laundering (AML) risk management, and third-party risk management.
As a result, the OCC instated a compliance committee on the bank’s board, and among other enforcements, subscribed it to a Third-Party Risk Management Programme to “effectively assess and manage the risks posed by third-party fintech relationships”.
The programme not only subjected the bank’s BaaS relationships to lengthy written assessments, audit plans for independent reviews, and heightened partner due diligence, but also required the supervisory approval of the OCC before any new partners were onboarded.
While the bank focuses on these regulatory requirements, its strategy outlined at its investor presentation shows plans to “limit sub-partners with high account volume and/or small deposit balances per account” as a means to reduce “significant compliance oversight”.
Blue Ridge Bank has not responded to FinTech Futures‘ request for comment.
