Global: Treasury Prime Shifts Focus to Direct Bank Sales Amid Regulatory Pressures

The evolution of financial services into digital realms, coupled with the emergence of open banking, has spurred a transformative landscape of partnerships within the industry. Traditional banks and innovative FinTech startups have increasingly formed alliances, leveraging their respective strengths to drive innovation and meet evolving consumer demands. Amidst this dynamic environment, intermediaries facilitating these partnerships find themselves navigating an increasingly complex regulatory landscape, prompting strategic shifts and adaptations.

This week, Treasury Prime, a banking-as-a-service platform, made headlines as it announced a significant restructuring, including staff reductions, and a pivot towards direct sales to banks. Previously, the company primarily targeted FinTech firms, facilitating collaborations between these innovators and traditional banking institutions.

The transition towards a bank-direct model follows Treasury Prime’s successful Series C financing round, where it raised $40 million about a year ago. At that time, CEO Chris Dean outlined plans to expand the platform’s banking partners, signaling growth and ambition within the FinTech ecosystem.

The move towards direct relationships echoes similar strategies adopted by industry peers such as Affirm and Chime. Affirm, for instance, collaborates directly with Cross River Bank and Celtic Bank, while Chime partners with Bancorp Bank and Stride Bank. This trend underscores the growing importance of direct engagements between banks and technology providers, reflecting a strategic response to regulatory scrutiny and evolving risk management frameworks.

Regulators, including the Office of the Comptroller of the Currency, have intensified their focus on due diligence and risk management, particularly concerning third-party relationships. Intermediaries acting as conduits between banks and FinTech firms face heightened oversight, prompting a reevaluation of operational and compliance protocols. Banks, recognizing the imperative of effective risk management, are increasingly inclined to internalize control and oversight functions, a trend likely to gain momentum in the coming years.

The regulatory landscape underscores the critical importance for banks to comprehensively manage third-party risks associated with FinTech partnerships. As the industry navigates evolving regulatory mandates, the strategic recalibration of business models and operational frameworks is essential to ensure compliance and sustain growth in an increasingly regulated environment.