Alloy unveils new risk management solution for banks and FinTechs

By Delisha Fernandes

Alloy, an identity risk management company, has launched Alloy for Embedded Finance, a new product custom-designed for sponsor banks, BaaS providers, and their FinTech partners. The solution allows them to collaboratively manage identity risk while meeting regulatory requirements.

Frequently, sponsor banks have not had sufficient oversight or control over whether their FinTech partners have adhered to the banks’ government-mandated compliance requirements. Alternatively, in models where sponsor banks have taken on all compliance responsibilities, they have often forced their FinTech partners into a one-size-fits-all approach to compliance that doesn’t suit FinTechs’ evolving risk needs and often adds unnecessary friction to their user experiences.

“Sponsor banks can’t operate without controlling the CIP/KYC and AML/BSA policies of the fintechs in their program—recent enforcement actions make this clear,” said Tommy Nicholas, CEO and Co-founder at Alloy. “At the same time, risk programs that are ‘one size fits all’ result in terrible user experiences for FinTechs that pride themselves on providing a frictionless interface. Alloy for Embedded Finance solves both sides of this problem.”

By launching Allow for Embedded Finance, the company aims to mitigate the aforementioned issues, with the new product leveraging the capabilities of Alloy’s existing platform while introducing a new parent/child account configuration. Sponsor banks (or ‘parent accounts’) have the ability to designate different levels of autonomy and guardrails for each of their FinTech partners (or ‘child accounts’), depending on how mature the FinTech is, how much of the process the FinTech wishes to own, and the risk appetites of both parties.

With this construct, sponsor banks can seamlessly build compliance policies, then issue and enforce them to each of their FinTech partners all at once. More mature or ‘autonomous’ FinTechs can customize their controls on top of these baseline policies, giving them the flexibility to tailor risk measures that don’t add unnecessary friction for end users. Regardless of the autonomy level a FinTech partner has, their sponsor bank retains total oversight of their policies to ensure they are fully compliant.