Community banks in the United States are increasingly partnering with third-party financial technology companies (fintechs) to access innovation. The Federal Reserve supports responsible innovation that provides community banks access to new technologies, while ensuring safety and soundness of the institutions and protection of consumers.
This paper is intended to serve as a resource for community banks as they embark on responsible innovation. It provides an overview of the evolving landscape of community bank partnerships with fintechs, including the benefits and risks of different partnership types, and key considerations for engaging in such partnerships. While these lessons may apply broadly to the community bank sector, each institution should evaluate how fintech partnerships fit into their own strategic objectives based on their research, risk profile, and third-party risk management practices.