James Kim, a partner in Troutman Pepper’s Consumer Financial Services Industry Group, was quoted in the April 29, 2024 S&P Global Market Intelligence article, “Banking-as-a-Service Players at Crossroads Weighing Growth, Compliance Costs.”

Still, regulators have recognized the benefit of BaaS when done correctly. While those recent consent orders may have created an inaccurate perception that compliance issues in BaaS have become an acute problem, it is not true that regulators are simply trying to squeeze the broader business model, said James Kim, a partner at Troutman Pepper.

“Appropriate third-party risk management isn’t new. It’s been around for a long time,” Kim said in an interview. “Third-party risk management has evolved to include fintech partnerships over the years. I think that’s the broader context.”

Banks that manage to weather the current storm will come out stronger in a market with more rationality, Kim said.

“Some people may think that [prudential regulators] will be so strict that they will largely eliminate fintech partnerships. I don’t see that,” Kim said.