Partner-bank due diligence is the review a bank carries out on a fintech, payment company or other non-bank before entering a partnership that lets it offer the bank's products, and repeats throughout the relationship. It covers the partner's ownership, finances, compliance program, operations and the risks its customers bring to the bank.
The term is also used from the other direction: the evidence a fintech assembles to pass a bank's review, and the onboarding standards the bank then imposes on the fintech's own customers.
Why it matters
In the US, the reference point is the June 2023 interagency guidance on third-party relationships from the Federal Reserve, FDIC and OCC. It frames third-party oversight as a life cycle: "planning, due diligence and third-party selection, contract negotiation, ongoing monitoring, termination." It also restates the principle behind every bank's questions: "a bank's use of third parties does not diminish its responsibility to perform in a safe and sound manner and comply with laws." The guidance is risk-based, so more critical activities get deeper review.
For a fintech, passing the bank's review decides whether it can launch or keep operating. For crypto, stablecoin and payment businesses, the review is often the longest step between building a product and going live.
What a bank typically reviews
Specific requests vary by bank. Common areas:
- Ownership and management. Beneficial owners, directors, key executives, screening and background checks.
- Financial condition. Funding, runway, financial statements.
- Business model and customers. Who the partner serves, in which jurisdictions, and the expected flows through the bank.
- Licences and registrations. For example FinCEN MSB registration and state money transmitter licences where the activity requires them.
- Compliance program. BSA/AML officer, policies, customer onboarding procedures, transaction monitoring, sanctions screening, SAR referral process, independent testing.
- Operations and resilience. Information security, business continuity, complaint handling, subcontractors.
- Data access. Whether the bank can see customer files and the evidence behind onboarding decisions.
Common pitfalls for the fintech
- Policies that describe controls not yet running. Banks ask for evidence the control operates, such as sample files and QA results.
- Inconsistent answers across documents, such as expected volumes that differ between the business plan and the compliance questionnaire.
- Re-assembling the same evidence from scratch for each bank.
- Underestimating what ongoing monitoring means: periodic reviews, file sampling and change approvals after launch.
Related terms
Sponsor bank, banking as a service, travel rule, enhanced due diligence.
Sweat AI is an AI-native BPO for banks and fintechs, working onboarding and fraud queues. For fintechs preparing for a bank or provider review, our analysts map the evidence you have against the stated requirements and list what remains to provide. That is an evidence assessment: approval stays with the bank. See KYB for stablecoin and crypto platforms.
Questions
Is the interagency guidance a binding rule?
It is supervisory guidance. The Federal Reserve's SR 23-4 notes that supervisory guidance does not have the force and effect of law, but examiners use it to assess how banks manage third-party risk.
Does the review end once the partnership launches?
No. Ongoing monitoring is one of the five life-cycle stages in the 2023 guidance, alongside planning, due diligence and selection, contract negotiation, and termination.