[FinTech Shark Week] FinTech Waves Ahead: Navigating Growth with Risk in Mind with Guests Mark Forbis, Stephen Coburn, and Mary Mumper-Morrison
Wrestling Payments Podcast: Season 3 - Episode 16
Financial institutions face a critical challenge: how to modernize payment operations through FinTech partnerships without compromising compliance. On this episode of Wrestling Payments, host Elyssa Morgan explores practical strategies for balancing innovation with regulatory requirements in today's rapidly evolving payments landscape.
Mark Forbis, former CTO of Jack Henry, and Stephen Coburn, CEO of Avalo Labs, reveal what actually works when banks and FinTechs attempt to collaborate. Mark shares why most institutions approach these partnerships in the wrong way, while Stephen discusses the cultural mismatches that can doom promising relationships before they even begin. Both guests have witnessed spectacular failures and quiet successes in this space.
The conversation reveals the hidden complexities of third-party risk management and examines why traditional due diligence often overlooks critical warning signs. From fourth-party vendor oversight to the real story behind recent industry shake-ups, this episode provides payment operations leaders with frameworks they won't find in regulatory guidance. The guests also address what happens when FinTech partners fail and how smart institutions prepare for scenarios most never consider.
💡 Read Mark's Article Building Smarter Fintech Partnerships for Innovation and Risk Control
💡 Hear from Mark & Stephen in our free webinar: Building Smarter Fintech Partnerships: Navigating Pitfalls while Optimizing Innovation and Growth Opportunities
Guest-at-a-Glance
💡 Name: Mark Forbis
💡What he does: Former CTO & Board Member
💡 Company: Avalo Labs
💡 Noteworthy: 32 years at Jack Henry, sits on multiple bank boards, executive partner with THL for financial services due diligence
💡 Where to find him: LinkedIn
Guest-at-a-Glance
💡 Name: Stephen Coburn
💡 What he does: CEO & Co-founder
💡 Company: Avalo Labs
💡 Noteworthy: Built treasury management platform focused on compliance, background in AML and compliance consulting, helped remediate banks under consent orders
💡 Where to find him: LinkedIn
Guest-at-a-Glance
💡 Name: Mary Mumper-Morrison
💡 What she does: Director of Education
💡 Company: NEACH
💡 Noteworthy: Over a decade at FinTech before joining NEACH, specializes in third-party risk management and payment compliance education
💡 Where to find her: LinkedIn
Host-at-a-Glance
💡 Name: Elyssa Morgan
💡 What they do: Vice President of Membership at NEACH
💡 Company: NEACH
💡 Noteworthy: Guides conversations helping payment professionals navigate modernization challenges and build for the future.
💡 Where to find them: LinkedIn
Key Insights
Cultural Alignment Determines Partnership Success More Than Technical Capabilities
Cultural mismatches between financial institutions and FinTechs create more partnership failures than technical incompatibilities. Successful collaborations require shared risk appetites and similar approaches to compliance interpretation. When institutions rush to partner with innovative FinTechs without evaluating cultural fit, they often discover fundamental disagreements about regulatory requirements and growth strategies. The most sustainable partnerships emerge when both parties share similar values around compliance and have compatible approaches to risk management. This alignment becomes particularly critical during challenging periods when regulatory pressures increase or market conditions shift.
Fourth-Party Risk Creates Hidden Vulnerabilities in FinTech Partnerships
Financial institutions must understand not just their direct FinTech partners but also their partners' vendors and service providers. Fourth-party risks multiply exponentially, as FinTechs often rely on offshore customer service providers, cloud infrastructure providers, and specialized software vendors. When these downstream providers fail or experience security breaches, the impact flows directly back to the sponsoring bank. Effective risk management requires continuous monitoring of the entire vendor ecosystem, including regular assessments of fourth-party providers' financial stability, security protocols, and business continuity plans. This expanded due diligence approach helps institutions avoid unexpected disruptions.
Early Compliance Integration Prevents Costly Partnership Failures
Involving compliance teams at the beginning of FinTech evaluations rather than treating compliance as a final checkpoint dramatically improves partnership outcomes. Many institutions make the mistake of falling in love with a FinTech's technology before understanding the regulatory implications. This backwards approach leads to expensive discoveries late in the process when compliance issues surface that could have been identified earlier. Successful institutions incorporate compliance expertise into initial discussions, enabling them to structure partnerships that meet regulatory requirements from the outset, rather than retrofitting compliance after contracts are signed.
Contingency Planning for FinTech Failure Requires Customer Data Ownership
Smart financial institutions prepare for FinTech partner failures by establishing clear protocols for data ownership and customer relationships upfront. When FinTech partners collapse, institutions need immediate access to customer information and the ability to continue serving those customers directly. The most prepared banks include contract clauses that automatically transfer customer relationships back to the institution if the FinTech fails. This preparation requires maintaining visibility into customer data throughout the partnership and having operational capabilities to quickly onboard transferred customers. Recent industry failures demonstrate that institutions without these contingencies face significant customer service disruptions and potential regulatory scrutiny.
Episode Highlights
Strategic Alignment Before Partnership Evaluation [00:12:00 - 00:15:00]
Before evaluating any FinTech partner, financial institutions must clearly define their strategic objectives and ensure potential partnerships align with specific business goals. Many institutions pursue partnerships simply because technology appears innovative, rather than addressing genuine operational needs. Successful partnerships require institutions first to identify whether they're seeking deposit growth, lending solutions, or new revenue streams. This strategic clarity helps focus due diligence efforts and creates measurable criteria for partnership success.
"It does need to align with your strategic objectives. Are we growing deposits? Are we looking for lending solutions? Are we trying to get into a new deposit growth area? Or are we going into something much broader? Those all have their own separate risk and risk appetite components."
Operational Infrastructure Requirements for High-Risk Payment Businesses [00:16:00 - 00:19:00]
Financial institutions entering high-intensity payment businesses through FinTech partnerships must ensure they have a robust operational infrastructure before launching these relationships. Different business models require specific technological capabilities and risk management tools. The conversation reveals that many banks underestimate the operational complexity of supporting FinTech partners and lack adequate transaction monitoring, sanctions screening, and fraud detection systems. Building this foundation before partnership launch prevents costly operational failures and regulatory issues.
"If you're going to get in a highly intensive payments business or FinTech payments business, then you want to make sure you got really good transaction monitoring, sanction screenings, tools to be able to monitor that effectively. If you're looking at doing card programs, then you might want to have really good fraud controls around that."
The Reality of FinTech Startup Failure Risk [00:26:00 - 00:30:00]
FinTech partnerships carry inherent startup failure risks that institutions must acknowledge and prepare for through comprehensive contingency planning. The collapse of companies like Synapse demonstrates how quickly promising FinTech relationships can deteriorate. Smart institutions recognize that startups have high failure rates and build protective measures into their partnership agreements. This includes establishing clear customer data ownership and creating operational procedures for absorbing FinTech customers if partnerships dissolve.
“If you're a sponsor institution, what happens if that FinTech goes belly up? What happens to those clients? What if you've built this great, amazing deposit base based on this FinTech opportunity, and now that opportunity disappears? What are your contingency plans around that? Last year, we saw the big collapse of Synapse, and that was a disaster. It was like a slow-moving train that a lot of people saw coming. There were a lot of red flags that were clearly visible, and it seems like they were unable to fix it.”
Applying Existing Risk Management Frameworks to FinTech Partnerships [00:30:00 - 00:35:00]
Financial institutions already possess sophisticated risk management frameworks that can be effectively applied to FinTech partnerships rather than creating entirely new evaluation systems. Banks have decades of experience managing credit and operational risks across various business lines. The key insight is recognizing that FinTech partnerships represent an extension of existing risk management disciplines. Institutions can leverage their expertise by adapting these frameworks to evaluate FinTech partners.
"We're in the risk management business. Over the last quarter century, operational risk management has become a big thing at multiple banks. You've got this framework already within your institutions. It's about applying this to a customer of yours [...] There might be some AML risk management you have to do. There might be some credit risk management as well, whatever it is. But these are frameworks that, as an institution, you probably already have."
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