Reusable FinTech Certification Could Streamline Bank Due Diligence
A proposed federal regulatory framework could reduce the repeated due-diligence work banks conduct on FinTech and other technology providers by allowing standardized assessments to be reused across institutions. The Federal Deposit Insurance Corporation (FDIC) has outlined a voluntary public-private model that would establish common standards and a certification program for third-party providers, potentially lowering compliance costs while leaving final vendor decisions with individual banks.
Proposed Framework Targets Repeated Vendor Reviews
A July 21 draft term sheet outlines a proposed Banking Innovation Standards Development Organization, or BISDO, alongside a certification program called Risk-Assessed, Manageable Partnerships, or RAMP.
Under the proposal, portions of third-party risk assessments could be standardized, completed once, periodically refreshed and then used by multiple banks. The initiative is intended to address the duplication that occurs when financial institutions repeatedly request similar information and documentation from technology providers.
The proposal comes as FinTech companies expand their relationships with smaller financial institutions, including credit unions, potentially increasing the need for efficient and consistent vendor assessments.
PYMNTS Intelligence data show that 48% of FinTechs offering end-user products or services through third parties partnered with credit unions last year, up from 40.3% in November 2024. Partnerships with digital-only banks increased to 66.7% from 61%.
By contrast, partnerships with national banks declined to 16% from 36.4%, while regional-bank partnerships fell to 14.7% from 41.6%.
The figures were published in the Credit Union Innovation Readiness Index: How FinTechs Are Shifting Their Partnership Strategies, a collaboration between PYMNTS Intelligence and Velera.
Among FinTechs already serving credit unions, 38% identified slow purchasing decisions as an obstacle, while 34% pointed to complicated regulations and 32% cited lengthy implementation. Only 16% identified technology infrastructure as an impediment.
Community Banks Could Be Major Beneficiaries
Although community banks and credit unions are highlighted in the proposal, the BISDO concept is not limited to those institutions.
The draft describes a framework for banks generally and says its mature scope could eventually cover “any category” of third-party provider or outsourced banking activity where reusable standards and independent assurance provide value.
Community banks receive particular attention because repeated vendor reviews can place a heavier burden on institutions with limited personnel, technical expertise, negotiating leverage and resources for evaluating complex or unfamiliar arrangements.
The term sheet therefore says community banks “may benefit in particular” from standardized certification.
Certification Would Not Replace Bank Decisions
Under the proposed structure, BISDO would establish or recognize common standards, while RAMP would certify individual providers or solutions against those standards. Independent assessors would conduct the underlying evaluations.
A RAMP certification could function as a “green light to consider,” particularly for community banks that may not have the resources or expertise to assess numerous providers or technology solutions independently.
However, certification would not amount to approval by a bank.
The draft keeps institution-specific analysis, contracting, integration, monitoring and oversight with individual financial institutions. The reusable component would be the standardized information and assessment rather than the final decision on whether a provider should be selected.
Reusable Assessments Could Affect Vendor Competition
The framework could also influence competition between established technology vendors and companies seeking their first bank customers.
Providers that already work with banks have existing relationships, documentation and experience responding to financial institutions' risk assessments. New entrants, meanwhile, must complete those requirements before their products can be evaluated alongside incumbent providers.
The term sheet specifically identifies repeated and inconsistent information requests as a cost for third-party providers. Under the proposed framework, providers could distribute the cost of an assessment across multiple bank clients instead of repeatedly preparing similar due-diligence packages.
That could reduce one recurring expense associated with pursuing additional banking customers.
Whether the system would ultimately change vendor selection would depend on how much of the standardized assessment banks are able to reuse. If the final framework allows institutions to rely on independently completed assessments for defined portions of vendor due diligence, providers could present the same evidence to multiple prospective bank clients rather than repeatedly producing customized versions.
Individual banks, however, would continue to determine whether a provider meets their specific operational needs and risk requirements.