Axiom Banking

Rigoni spent years at Evolve Bank & Trust and Coastal Community Bank working on partner banking programs, scaling fintech relationships and dealing with the operational and regulatory realities that rarely make it into conference presentations. He has watched the space evolve from the Simple Finance and BBVA era, through the BaaS gold rush and the consent order reckoning and across financial services as the lines between banks, fintechs and payments companies have blurred. He writes The Finserv Minute, where he shares what he's learned about financial services more broadly.

Partner banking extends financial services to people a bank would not otherwise serve by pairing a regulated institution with a company that knows how to find and serve a specific customer. The model deserves credit for that and the industry has spent the last few years forgetting to say so.

Consider the customer with a thin credit file or none at all. A traditional underwriting model sees nothing to score and says no, which tells the applicant nothing about whether they can repay. A fintech partner may see what the bureau misses, such as steady deposits from an employer, a record of paying rent and utilities on time, or the cash flow of someone who earns through gig work and build a product around that data. The bank provides the charter, balance sheet and compliance obligations, while the partner provides the customer relationship and technology. Neither could reach that customer alone: the bank lacks distribution and product design and the fintech lacks the license to hold deposits or originate credit.

“Reach is easy to count and difficult to supervise. A bank can report accounts opened and dollars deposited and still not know whether each customer was properly identified.”

The unbanked and underbanked follow the same pattern. Many left the traditional system because of overdraft fees, minimum balances, or branch hours that don't fit a shift schedule and a mobile account with no overdraft fees and early access to wages meets them where they already are. A community bank with a handful of branches can serve customers in states where it has never had a presence and customers can get an account at an insured institution instead of a check casher or a high-cost lender.

The harder question is what the bank knows about those customers once they arrive. Reach is easy to count and difficult to supervise. A bank can report accounts opened and dollars deposited and still not know whether each customer was properly identified, whether complaints are rising, whether the marketing matches the product, or whether someone other than the account holder is using the account. These customers are also least able to absorb a failure, because a frozen account, an unexplained fee, or a program that winds down overnight can cost someone with no savings their rent for the month.

Most of what went wrong in the last several years was a failure of proportion more than a failure of the idea. Programs grew faster than the bank's ability to monitor them and the oversight that existed was a policy control and a report that was generated, filed and never read. A bank that adds ten thousand accounts a month with one reviewer has made a decision about those customers, even if nobody in the building said it out loud.

Oversight that scales with the program looks like three things. First, size the oversight to the program before launch, with monitoring and complaint review set against projected volume and growth, tied to the bank's capacity to review it, so a partner's success does not outrun the bank. The second is data the bank owns and can query itself, since a partner's dashboard or representation is not evidence and a bank that cannot see the transactions cannot monitor them. The third is a named owner at the bank who reads the reports and a contract that lets the bank pause onboarding, cap volumes, or exit without a negotiation. For any customer in the program, the bank should be able to show who they are, what their account does and who looked.

Some will say the safest answer is to stop, which removes the bank's risk without removing the customer's need and those customers move to providers with less supervision and less visibility, which is a worse outcome for them. The better answer is a program built to the standard those customers deserve.

Partner banking earns its place when a bank can answer two questions together: who it reached and how it knows they are being served well. A bank that can answer both has expanded access and a bank that can answer only the first has expanded its exposure.