The Top Six Considerations for Evaluating a Fintech Partnership

By Katherine Kane


The promise of Open Banking enables fintechs to accelerate the development of new financial tools and products, while providing significant growth opportunities for community banks. Configurations of Banking-as-a-Service (Baas) and Embedded Finance relationships can vary, with multiple participants and providers—but there’s always at least one chartered financial institution involved. At the end of the day the bank holds responsibility for products and services offered on its charter.

CCLF limited partners include a few sponsor banks, and more have begun exploring the possibilities. So we tapped the wisdom of Hank Word, the President of Open Banking at Evolve Bank & Trust, a leading financial and technology institution and BaaS provider, that supports a diverse range of fintech companies, including neobanks and aggregators. What advice does his team have to share from the bank’s journey over the years through this ever-changing landscape?

“Managed Services”

That’s how Word described the bank’s approach to vetting third-party risks in new partnerships. Evolve has its own set of back-office solutions. The sponsor-seeking fintech may or may not. If the fintech intends to rely on its own third party-providers, the bank needs to be sure those functions are being performed as promised. To strike a balance between control and flexibility they have a short list of “preferred providers,” and a willingness to evaluate and add to it.

“In any partner relationship, it is important to have clearly defined responsibilities,” said Word. “We found that a Scope of Work document with each line item assigned to a responsible party is a great way to hold ourselves and our partners accountable.”

In discussions between a bank and a fintech, both are evaluating the partnership fit. While the following list focuses on the fintech and its providers, a bank also needs to present itself as a suitable partner. Evolve aims to communicate its speed, agility, product diversity, and collaboration to meet fintechs’ needs.

To get a clear and comprehensive view of a prospective fintech partnership—and evaluate if, when, and how to proceed—discuss these six key considerations:

Business Suitability

Do they have a credible business model with well-defined use cases? The bank should have a clear overview of the fintech’s objectives for a fundamental understanding of how to support those responsibly. Does the partnership seem well-aligned for mutual success in the given market?

“Banking-as-a-Service is not ‘one size fits all.’ Finding the correct fintechs to partner with should involve considering the compatibility between the bank and the fintech” said Word.


What specific products will the fintech offer? This discussion point often serves as an educational moment for the fintech, and helps them figure out exactly what they need from a bank. For instance, if their product offering will involve the card networks, do they want their own BIN?

“As the sponsor bank, it’s important to levelset with customers and educate them on the specific nuances of banking. Oftentimes, great financial innovators know their end goal or target customer and it is our job as the bank to guide them how to get there,” said Word.


Ensure you’re both agreeing to a realistic timeline. How ready are they to go to market, including considerations such as staffing? Have you made clear the amount of time needed to meet compliance obligations?

Community banks tend to be more nimble than big banks, but early stage startups face tremendous time pressure. Certain processes take a set amount of time, so figure out. which are relevant to this fintech—and set proper expectations. Also consider how your team’s time commitment to supporting this fintech will fit with the bank’s existing pipeline.

“Time is always of the essence in financial services. Transparency on time to market is key on both sides. It’s important to understand the fintech’s wants and needs while remaining realistic with internal capabilities,” said Word.

Capital Funding

Again, how viable are they as a worthwhile partner? Does their most recent funding raise provide enough runway to get them through the timeline to market? Will they be able to continue paying their third-party providers? Sometimes the evaluation process pauses here, and they say “let’s talk again in six months.”

“With the uncertain macroeconomic environment, recognizing funding requirements and realities is crucial in establishing successful partnerships. The bank needs to understand the financial viability of the fintech in order to best assess the potential partnership. And sometimes that means revisiting the opportunity in a few months,” said Word.

IT & Cybersecurity

Will this fintech have the infrastructure for safe transactions? If they’re offering a card product, will their technology stack meet data security standards?

Here we get into the complex dynamics of a partner’s third-party providers. Across the many subcategories for Critical Service Providers they could go with the bank’s in-house solution, or perhaps they have their own choices lined up. Do those meet your standards for cybersecurity and risk tolerance? Or would you need them to opt for one of your preferred providers?

“Keeping our partners, end users, and the bank safe and secure is the ultimate underlying goal in all we do at Evolve. Understanding how the bank’s existing environment will interact and pass data to the potential partners’ environment is incredibly important. Also, understanding any additional service providers and how their environments play into the equation is critical to making sound partnership decisions,” said Word.


The high priority of regulatory compliance is obvious to almost all bankers, but the degree to which fintech founders understand these issues varies widely. This is the crux of the partnership. They need your regulator-issued charter to function, and your bank bears responsibility for the products and services it enables to comply with all state and federal regulations.

The fintech may execute on these requirements, but the bank needs to ensure compliance. Communicate clear decisions about which of you will handle each requirement. Again, if they are opting for a third-party provider, and it’s not one you’ve already vetted, you’ll need to assess whether or not it meets your standards. BSA/AML areas, such as KYC at customer onboarding and ongoing transaction monitoring for suspicious activity, are especially crucial and warrant thorough discussion. Their product end user, consumer or business, matters here as the requirements differ, and the bank should evaluate whether the product vertical aligns with its risk portfolio.

Compliance is ongoing. Even if the fintech has taken on certain functions, and gotten it right from the start, the bank still needs to oversee that compliance continues to meet regulatory standards—as well as shifting expectations or new regulatory guidance—day after day.

“Agility and consistency are words that come to mind when considering compliance in bank/fintech partnerships. Regulations are changing frequently and partner banks must have the bandwidth allocated to not only understand the regulations, but also pass the requirement details on to any existing and new partners.”

What’s a good approach for one bank, may vary for another. Some may need the certainty of a narrow set of providers, others may be able to manage the risk of more complexity. For a bank with a strong focus on fintech sponsorship having “dedicated teams for BSA/AML, fraud, and other areas have helped us stay ahead of the dynamic regulatory environment,” said Word.

“Middleware” layers have also emerged as BaaS participants. If the prospective partner provides a platform to its own partners, apply these six considerations to “the evaluation within the evaluation.”

The overarching messages from Word: a prospective sponsor bank should seek the right balance of control and flexibility in its approach to evaluating a fintech partner and their providers. His team focuses on continually improving and refining how they communicate with fintech partners.

“To remain relevant in this marketplace, partnering with fintechs via open banking solutions is a great way to modernize existing banks. However, potential partnerships must be evaluated thoroughly to ensure probability for success for all parties. Evolve is committed to being a dynamic and flexible bank partner, but we could not have gotten to this point without solid risk parameters and an internal team dedicated to the missions of enabling banking for financial innovators,” said Word.