Direct relationships are key to success in the BaaS industry.

TLDR:

Key Points:

• BaaS providers are shifting towards direct relationships with banks and fintech partners.
• Regulatory pressures and the need for more oversight are driving this change.

In the article “Why Direct Relationships Are The Way Forward For BaaS,” Kate Drew discusses the evolving landscape of Banking as a Service (BaaS) and the importance of direct relationships between banks and fintech partners. The shift towards direct relationships has become necessary due to regulatory pressures and a need for more oversight and compliance within the industry. Recent developments, such as BaaS provider Treasury Prime selling its technology directly to banks and Piermont Bank focusing on direct relationships with fintechs, indicate a move towards more transparent and accountable partnerships.

One of the main reasons for this shift is the increasing scrutiny from regulators, with many BaaS banks facing consent orders for lack of compliance. By establishing direct relationships, banks can better manage and monitor their operations, meeting the expectations set by regulatory bodies. While this may require banks to step up their business development and due diligence capabilities, it also presents an opportunity to solidify their position in the evolving BaaS market.