Your Fintech Vendor Is Not Your Partner
Every fintech sales deck uses the word "partnership." Every single one. They want to be your "strategic partner" in "digital transformation." They'll "walk alongside you" on you...
Every fintech sales deck uses the word "partnership." Every single one. They want to be your "strategic partner" in "digital transformation." They'll "walk alongside you" on your "innovation journey."
Let me be blunt: they're vendors. And the sooner your board treats them that way, the safer your institution will be.
This isn't cynicism. It's governance. And the distinction between a partner and a vendor isn't semantic. It determines who carries the risk when something goes wrong.
The Fintech Gold Rush Hit Community Banking
Over the past three years, community banks and credit unions have been flooded with fintech pitches. Faster payments. Digital account opening. AI-powered lending. Embedded banking. The promises are exciting, and many of the products are genuinely good.
The Conference of State Bank Supervisors (CSBS) reported in 2025 that 85% of community banks had at least one fintech relationship, up from 49% in 2021. Credit unions saw similar growth, with CUNA's 2025 technology survey showing fintech vendor contracts tripled at institutions under $1 billion in assets over the same period.
That's a lot of new third-party relationships. And here's the problem: most boards approved these contracts the same way they've always approved technology purchases. They asked about cost, timeline, and features. Then they moved on to the next agenda item.
But fintech relationships aren't like buying a new core processor or upgrading your ATM fleet. They're fundamentally different in ways that create risk your board might not be seeing.
Three Risks Hiding in Your Fintech Contracts
Your data is leaving the building. Traditional vendor relationships kept most of your member or customer data inside systems you controlled. Fintech integrations are different. Your data flows through APIs into cloud environments managed by companies that might be two years old with twelve employees. The OCC's 2025 guidance on third-party risk (OCC Bulletin 2025-07) specifically flagged data residency and portability as areas where community bank boards need direct oversight. Not IT. The board.
Your brand is in someone else's hands. When a member opens an account through your fintech-powered digital platform and has a bad experience, they don't blame the fintech. They blame you. A 2024 J.D. Power study found that 73% of banking customers couldn't distinguish between services provided by their bank versus embedded fintech products. Your members think it's all you. Which means their complaints, their frustration, and their social media posts are all about you.
Your compliance obligation doesn't transfer. This is the one that catches boards off guard. You can outsource a function, but you cannot outsource the regulatory responsibility for that function. The FDIC has been crystal clear on this. Their June 2025 guidance on fintech partnerships states: "A bank's use of third parties does not diminish its responsibility to comply with all applicable laws and regulations." Your fintech vendor's compliance failure is your compliance failure.
Lessons from the Real World
You don't have to look far to see how these risks play out.
In 2023, Synapse Financial Technologies collapsed, leaving thousands of customers at partner banks unable to access their funds for weeks. The fintech had positioned itself as critical infrastructure for multiple community banks' digital banking programs. When it failed, those banks faced angry customers, regulatory scrutiny, and reputation damage that had nothing to do with their own operations. The FDIC cited this incident extensively in its 2025 third-party risk guidance as a cautionary example.
Then there's the Evolve Bank situation from 2024. The Federal Reserve issued a consent order after finding that Evolve's fintech partnerships had grown faster than its ability to manage the associated risks. The bank had over 100 fintech relationships. The consent order specifically cited inadequate board oversight of third-party risk management. Not inadequate IT management. Inadequate board oversight.
I saw a version of this dynamic firsthand, years before "fintech" was even a word. When I was CTO at Bank of New Glarus, a $350 million community bank, every technology vendor wanted to be treated as a trusted insider. And I get it. Building good vendor relationships matters. But there's a difference between a good working relationship and blurred accountability. The vendors who respected clear boundaries and well-defined SLAs were the ones who actually performed. The ones who wanted to skip the formal risk assessment because "we're partners"? Those were the ones that kept me up at night.
At Bankers Bank, processing $8 to $11 billion in daily transactions for correspondent banks across the country, third-party risk wasn't theoretical. A vendor failure cascaded to every bank we served. The governance frameworks we built there treated every vendor relationship, no matter how long-standing, as a risk that required continuous board-level visibility. Not because we didn't trust our vendors. Because trust isn't a control.
What Your Board Should Actually Do
The good news: you don't need to become a technology expert to govern fintech risk. You need to ask better questions and demand better answers.
Build a fintech inventory your board can actually read. Not a spreadsheet buried in IT's files. A one-page summary for every fintech relationship that answers four questions: What data do they touch? What member-facing functions do they perform? What happens if they disappear tomorrow? When was the last independent risk assessment? If your management team can't produce this document, that's your first finding.
Require concentration risk reporting. How many of your critical functions depend on the same fintech provider? How many depend on the same cloud infrastructure underneath multiple fintechs? The Synapse collapse showed what happens when concentration risk goes unmonitored. Your board should know, at a glance, where single points of failure exist in your fintech ecosystem.
Demand exit strategies before you sign. Every fintech contract should include clear data portability provisions, reasonable termination terms, and a documented transition plan. If a vendor pushes back on exit provisions, that tells you everything you need to know about how they view the "partnership."
Schedule an annual fintech risk review at the board level. Not buried in a committee report. A dedicated agenda item where the board reviews the full fintech portfolio, assesses concentration risk, and evaluates whether each relationship still aligns with your institution's risk appetite. The regulators are looking for evidence of active board engagement, not rubber-stamped reports.
The Bottom Line
Fintech innovation is real, and community financial institutions should absolutely be exploring it. But innovation without governance is just risk with better marketing.
Your fintech vendors are selling you a product. Some of them are selling you a great product. But they're not sitting in the regulatory hot seat when something goes sideways. You are.
The boards that thrive in this environment will be the ones that embrace fintech strategically while maintaining the governance discipline that separates a well-run institution from a cautionary tale.
I'd love to hear from board members and leaders navigating these waters:
1. How does your board currently evaluate and monitor fintech vendor relationships? Is it a dedicated agenda item or does it get bundled into general IT updates?
2. Have you ever had to unwind a fintech relationship that wasn't working? What made it difficult?
3. What's the hardest part of explaining fintech risk to board members who didn't grow up in technology?
Drop your thoughts below. The more we share, the better we all govern.
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