Alloy provides new tool to improve the audit process for sponsor banks

Alloy for Embedded Finance launches complimentary audit-only features for sponsor banks to view their fintech partners’ risk controls

Embedded finance is an emerging space for banks to multiply their growth opportunities. According to our recent State of Embedded Finance Report, sponsor banks' embedded finance partnerships drive 51% of their revenue and deposits on average.

At the same time, regulatory bodies have taken a keen interest in embedded finance partnerships, resulting in a spike in enforcement actions. And sponsor banks are feeling the heat: nearly two-thirds of sponsor banks surveyed agree that maintaining an embedded finance program is increasingly difficult, with 29% reporting they are unlikely to maintain their embedded finance program moving forward. 

I can’t blame them. There’s a lot at stake. 

That’s why we leveraged our years of experience working with sponsor banks, BaaS providers, and fintechs to create a solution supporting their partnerships with Alloy for Embedded Finance, which officially launched in February. 

Alloy for Embedded Finance adds new features to the existing Alloy platform to help our sponsor bank and fintech clients co-manage risk controls within their embedded finance partnerships more efficiently. These enhancements provide sponsor banks with a single platform for viewing, publishing, editing, and enforcing risk policies across their partner portfolio — ensuring effective collaboration and oversight. Since launching our embedded finance offering, we’ve signed several embedded finance clients, including top sponsor bank Grasshopper.

As the embedded finance space evolves, we will continue building features that solve its unique challenges. Many sponsor banks don’t want to manage their fintech’s risk controls directly but still need to be able to view and audit the fintech’s policies to remain compliant. The auditing process has historically been clunky, manual, and time-consuming.

Alloy is helping sponsor banks solve these challenges by offering complimentary audit-only access to sponsor banks, enabling them to view and audit their fintech partners’ risk controls within the Alloy platform. 

Auditing challenges strain bank/fintech partnerships

Sponsor banks must have comprehensive visibility into their fintech partners’ activities to prepare for regulatory examinations. Historically, sponsor banks audited their fintech partners through a highly manual process. They would request that their fintech partners export their policies, applications, and manual review data into spreadsheets and email or SFTP it over.

Rather than a real-time view, this is a batch approach with room for human error. Previously, the only alternative to this approach was for a fintech to grant sponsor banks access to several of their internal systems for auditing purposes. 

Both approaches are cumbersome and time-consuming for sponsor banks and fintechs — and become even more complex if the fintech works with more than one sponsor bank. Not to mention, examinations are only getting more intensive and regulators are looking for deeper detail more often as regulators continue to take closer aim at bank/fintech partnerships. 

With these operational hurdles and security challenges around data sharing, sponsor banks need help compiling and reporting on their fintechs' policies and the end customers onboarded through their embedded finance program. 

In Alloy's State of Embedded Finance report, sponsor banks named auditing their fintech partners' risk controls as a top challenge of managing embedded finance programs. Download the full report here

Alloy’s new, complimentary audit-only access empowers sponsor banks and EMIs with visibility into their fintech partners’ risk controls

To help embedded finance providers effectively oversee their fintech partners’ activities, Alloy is launching an Audit Access module as part of Alloy for Embedded Finance. This module grants sponsor banks and electronic money institutions (EMIs) complimentary access to view their fintech partners’ compliance policies and risk controls within the Alloy platform. The Audit Access module serves as a critical risk management resource for any sponsor bank or program manager in the embedded finance space. 

Key Benefits of Alloy for Embedded Finance’s Audit Access module 

• No more spreadsheets: Leave behind clunky spreadsheet exchanges for secure, anytime access to your fintechs’ aggregated policies, decisions on end customer activity, and review data.
• A single system of record: Access a unified dashboard to click into and review any of your fintech partner’s policies.
• Comprehensive visibility: Gain visibility into every end-customer’s identity and risk data.
• Real-time data: View your fintech portfolio’s data in real-time, eliminating batch approaches.
• Scalable solution: Easily add fintech partners as you scale your embedded finance program.

The goal is to enable shared visibility of end customers across an entire fintech portfolio for the purposes of compliance monitoring and reporting. This new audit-only module can be used alone or alongside our existing Alloy for Embedded Finance features for a more comprehensive, complete embedded finance solution.

"From a regulatory perspective, banks are required by default to have access to their fintechs' data," says Richard Scioli, General Manager of Global Fintech. “We're proud to be the first solution in the market to enable this access seamlessly for sponsor banks providing their services to fintech partners, who in turn increase the opportunities for consumers and businesses to access financial products. Alloy is uniquely positioned to facilitate collaboration between banks and fintechs, enhancing their ability to work together effectively and we're excited to continue to build on that mission."

Alloy is committed to helping all players in the embedded finance ecosystem solve risk management

We're committed to continue bringing sponsor banks, EMIs, and fintechs meaningful solutions to holistically solve identity and compliance challenges within embedded finance partnerships. What's next for Alloy for Embedded Finance? Soon, clients using Alloy for Embedded Finance will receive new features, such as supervisory transaction monitoring, recurring sanctions screening, and premium audit features, including aggregated analytics and notifications of policy changes.