While banks typically reserve the option to exit a partnership with financial technology companies, most fintechs do not have the same bargaining power over their bank partners.
The friction in customer experience, termination fees and risk-control protocols at banks makes it unlikely that a fintech company will quickly change a bank partner in a clear-cut manner, industry experts said. It could leave the fintech company in limbo if its sole bank partner encounters operational issues.
“We rarely recommend that you just pull the switch and move everything from bank A to bank B. It’s a lot to do all at once,” said Chris Dean, CEO of Treasury Prime Inc., a technology vendor enabling bank partnerships with fintechs. “What we recommend is that you add a second bank, and then if you want a transition, you can, but you could do that incrementally.”