Sponsor banking and embedded finance have shown significant improvements and will continue to be a viable business model for fintech. While considerable challenges are posed to a fintech looking for a sponsor bank, the core concept of data governance will always be one of the highest priorities. For our core services at iDENTIFY, as banks migrate their CORE data to Snowflake, staying compliant is highly prioritized as banks transition their CORE data. Recently featured on the Finance Webinar Series: Mastering Compliance and Data Governance in Bank Transitions, hosted by the American Fintech Council, the panel made some excellent points as they discussed data governance for banks transitioning to modern fintech. This article lists some of the key takeaways from the discussion.

Trends around Sponsor Banking and Embedded Finance

Technology, in general, has significantly improved for the convenience of their bottom line, customers who utilize any software. The discussion from this Finance Webinar Series started by discussing current trends for sponsor banking and embedded finance, typically on the utilization of modern technology. Some initial notes are as follows:

• Market projection: While some banks are exiting their sponsorship program, there will naturally be a demand for modern technology. Consumer demand for banking convenience via mobile applications and other app-based software has shown to be a core service offering for banks.
• Regulatory Oversight: Considering some banks have been issued consent orders, it is only natural that regulators are showing an increased interest in how bank partnerships operate. Sponsor banks must work diligently to address these concerns of compliance and risk management frameworks.

Solving Compliance and Data Challenges

Lee Easton, President of iDENTIFY, shared his insights and noted our current partnerships with sponsor banks. While utilizing exemplary software for our services, our team needs to be able to navigate compliance while banks migrate their CORE data.

One of the key challenges we see is data portability and the reliance on legacy systems that use batch file processing, making real-time integrations and seamless transitions difficult.

iDENTIFY's work with Snowflake—a leading cloud-based data platform—focuses on normalizing and validating data to enhance compliance and operational efficiency.

Discussing Modern Fintech

Everyone agreed legacy systems inherently pose risks considering the typical system batch processing. While it is a robust system, the inherent flaws of traditional processing can be improved with modern technology. Narkhede, Founder & CEO of Oscillar - mentioned how AI can be used with modern data frameworks to find any discrepancies in data that may lead to compliance and regulatory issues. AI is one of the many technological improvements that can prove revolutionary for risk management. Some other requirements for banks to stay compliant during bank transitions are as follows:

• Open Collaboration: Bank partnerships must be transparent between fintechs and banks. Banks must prioritize the tech stack of their fintech collaboration - to ensure they're equipped with standardized solutions backed by an active community.
• Modern Infrastructure: As mentioned previously about the importance of modern data frameworks, legacy systems pose inherent risks by its traditional systems. It's growing increasingly important for banks to modernize their infrastructure to break down data silos which can enable seamless data portability and compliance management.

Conclusion

As the webinar concluded, there are some great takeaways as we head into the new year and a new realm of innovation. Mastering compliance and data governance is the highest priority as sponsor banks face regulatory challenges. As banks transition to modern fintech, utilizing modern data infrastructure and ensuring that partnerships retain transparency are essential to the success of bank sponsorship programs. Similarly, the demand for modern fintech will continue progressing naturally amidst regulatory scrutiny.

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