Switching or adding a banking partner is a strategic move involving complex risks, legal obligations, and operational requirements. For fintechs, where banking-as-a-service (BaaS) relationships are central to delivering products and maintaining compliance, getting this transition right is critical. A poorly managed change can disrupt your business and damage the trust you’ve worked hard to build with your customers and with your partners.

Here’s what to consider before you make the move.

Why Fintechs Change Banking Relationships

There are plenty of valid reasons to consider a new or additional banking relationship. Maybe you’re preparing to launch a new product, expand into a new market, or reduce concentration risk by diversifying your partner base. In some cases, a fintech may simply outgrow its current relationship or find that the institution’s risk appetite no longer aligns with the business model.

Whatever the reason, the decision should begin with a clear-eyed understanding of the full picture—starting with your contracts.

Start with Your Agreements

Before initiating any conversations with prospective partners, examine your existing agreements. Many BaaS contracts include exclusivity clauses or restrictions on establishing relationships with other institutions. These provisions can be buried in legal language and easy to miss but overlooking them could create unnecessary friction, or worse, legal disputes, with your current partner.

Work with your legal and compliance teams to review these agreements thoroughly. If you’re unsure how to interpret exclusivity or non-compete terms, that’s where experienced advisors who understand BaaS partnership dynamics can be helpful. Addressing these terms early allows you to pursue new relationships with transparency and integrity, avoiding surprises later in the process.

Understand What a New Partner Really Means

Once you’ve cleared the path internally, the next step is due diligence on your prospective banking partner. It’s tempting to assume that all banks or credit unions that support fintechs operate similarly—but that’s rarely the case. Each partner has a different compliance culture, operational approach, and risk framework.

Before committing, ask:

• How long have they been working with fintechs?
• Do they specialize in certain types of programs or customer segments?
• What does their supervisory history indicate about how they manage risk and oversight?

A key step is talking to fintechs that already work with the institution. While your prospective partner won’t share proprietary details, they should be able to provide references or introductions. These conversations offer insights into how responsive, collaborative, and transparent the partner is in practice, not just on paper.

Know What You’ll Be Responsible For

No matter how exciting a new partnership may seem, it’s important to understand what you’ll be expected to implement and manage on the ground. Every institution will apply its own interpretation of regulatory guidance, and those interpretations will affect how you run your day-to-day operations. Failing to anticipate these changes can lead to missed deliverables or delays in your go-live timeline.

To prepare, ask prospective partners detailed questions like:

• What level of BSA/AML oversight will you require from us?
• What is your typical onboarding timeline?
• Who is responsible for transaction monitoring?
• What are our reporting obligations, and how frequently must we submit them?
• What kind of ongoing audits or reviews will we be subject to?

These conversations can reveal whether the relationship will be scalable—or simply transactional. If you’re juggling multiple partnerships, see our guidance on coordinating multi-bank audits.

Prepare Internally Before You Transition

Changing or adding a banking partner is disruptive, even when it’s a positive change. It takes significant time, coordination, and resources to get it right. From migrating customer accounts and updating contracts to revising compliance policies and realigning technical integrations, your team will need an internal roadmap that covers:

• Customer and vendor communication (if required)
• API reconfiguration and system integration
• Updated training materials and documentation
• Parallel compliance testing
• Revised risk assessments

Depending on your product and customer base, the switchover may involve regulatory notifications or increased scrutiny from existing oversight bodies. Build in sufficient time to meet these obligations while maintaining business continuity.

Choose a Partner, Not Just a Provider

In the fintech space, the strength of your program depends heavily on the strength of your partnerships. A banking partner doesn’t just provide access to financial services—they are also extending their charter and their reputation to your business. That level of trust means their compliance and risk functions will be deeply connected to yours.

That’s why it’s important to look beyond pricing or go-to-market synergies. Ask yourself:

• Is this institution aligned with our long-term vision?
• Do they have a proven ability to adapt under regulatory pressure?
• Will they work with us as true collaborators or as gatekeepers?

Making the right decision here lays the groundwork for smoother audits, faster product rollouts, and greater stability as your company grows.

We Can Help

At Elliott Davis, we help fintechs evaluate their readiness, conduct program assessments, and navigate complex transitions. Our team understands the regulatory, contractual, and operational realities that come with BaaS relationships.

If you’re considering a new banking partner, contact us today to discuss how we can support your strategy and help you move forward with clarity and confidence.

The information provided in this communication is of a general nature and should not be considered professional advice.  You should not act upon the information provided without obtaining specific professional advice.  The information above is subject to change.

The financial close process is a critical part of accurate and timely reporting, yet many organizations still struggle with month-end close challenges, such as manual data entry, data discrepancies, and limited visibility. These obstacles can slow down operations and increase the risk of errors.

In this article, we explore five of the most common close-related issues and provide practical solutions to overcome them. Strategies like implementing accounting software, standardizing procedures, and reallocating resources can help streamline reporting and shorten the close cycle. As more companies adopt technology-driven close processes, the opportunity to improve speed, accuracy, and efficiency is well within reach.

Challenge 1: Manual Financial Processing

Many organizations still rely on manual processes for data entry and reconciliation, which can lead to errors and delays. An accounting team might spend hours manually entering data from multiple sources into spreadsheets, increasing the risk of human error.

Solution: Implementing automation in accounting can significantly streamline data entry and reconciliation. By integrating with existing accounting systems, these tools help reduce errors, accelerate the close cycle, and handle data collection, reconciliation, and reporting. This frees your team to focus on more strategic tasks.

Challenge 2: Missing or Incomplete Data

Inconsistencies in financial data from different sources can cause significant reconciliation issues. Discrepancies between the general ledger and sub-ledgers can lead to time-consuming investigations to identify and resolve the differences.

Solution: Real-time data validation and integration across accounting systems help promote consistency and accuracy. By using accounting software that validates data as it is entered and connects multiple systems, organizations can reduce discrepancies and streamline reconciliation. This approach keeps data accurate and up-to-date, reducing the need for manual corrections.

Challenge 3: Lack of Standardized Workflows

Varying processes and procedures across departments can lead to inefficiencies and confusion. If different departments use different methods for closing their books, it can create bottlenecks and delays in the overall financial close process.

Solution: Standardizing workflows and setting clear month-end expectations can improve coordination and efficiency. Organizations should adopt standardized procedures for the financial close process, so all departments follow the same steps. This can include using checklists, templates, and timelines to guide the accounting team through each stage.

Challenge 4: Limited Real-Time Visibility and Transparency

Limited visibility into the financial close process can make it difficult to track progress and identify bottlenecks. If managers cannot see which tasks have been completed and which are still pending, it can lead to missed deadlines and increased stress for the accounting team.

Solution: Using real-time reporting tools and dashboards can enhance visibility and transparency throughout the close process. These tools provide a clear view of the status of each task, allowing managers to monitor progress and identify potential issues before they become critical. Real-time reporting also enables better communication and collaboration among team members, helping everyone stay on the same page.

Challenge 5: Resource Constraints

Limited staff and time can hinder the financial close process. A small accounting team may find it difficult to complete all the necessary tasks within tight deadlines, leading to delays and increased workload.

Solution: Leveraging technology to automate repetitive tasks and reallocating resources to focus on high-value activities can help overcome resource constraints. By automating routine tasks such as data entry and reconciliations, organizations can reduce their manual workload so their accounting teams can take on higher-value responsibilities. Additionally, cross-training staff and hiring temporary help during peak periods can provide the resources needed to handle the workload effectively.

We Can Help

Engaging an accounting and business advisory firm for fractional support can ease resource constraints and enhance operational efficiency. At Elliott Davis, clients benefit from specialized expertise and advanced technologies that support accurate and timely financial reporting. When experienced professionals manage complex accounting needs, internal teams can concentrate on core business priorities.

The financial close process is fraught with challenges, but with the right strategies in place, organizations can overcome obstacles and achieve a faster, more accurate close.

Contact us today to get started.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.

Following our recent Financial Services Group webinar, this article continues the conversation by exploring CECL compliance, hedging strategies, and regulatory developments.

Amid economic volatility and changing regulatory expectations, financial institutions that are quick to adapt will be better positioned to capitalize on emerging opportunities. The post-implementation phase of CECL is ushering in a new era marked by heightened expectations for accountability, model risk management, assumption governance, and sensitivity analysis. At the same time, institutions are rethinking hedging strategies to manage balance sheet exposure and earnings volatility, while staying alert to policy reversals and emerging guidance from regulators.

In the sections that follow, we examine how banks and credit unions can strengthen their compliance posture, refine their risk models, and modernize their financial strategies to stay ready for what lies ahead.

CECL, Model Risk, and What’s Changing Post-Implementation

Now a few years into CECL implementation, regulators are signaling that the initial “grace period” is over. Financial institutions are expected to demonstrate greater maturity in how their models reflect current economic realities, including GDP fluctuations, unemployment rates, and credit-specific risks. This has placed a renewed focus on model risk management and the use of sensitivity analysis to evaluate assumptions.

Model Validation and Sensitivity Analysis

Institutions are expected to:

• Conduct regular backtesting to assess model performance and input sensitivity.
• Use sensitivity analysis to identify key risk drivers and concentration points. Stressing assumptions like curtailment, prepayment, and funding rates helps management understand their impact on reserves. Running different model iterations (baseline, adverse, severely adverse) enables comparison.
• Perform annual validations (or biennial for smaller banks), particularly for those subject to Supervisory Letter SR 11-7: Guidance on Model Risk Management. Regardless of scope, documentation and independence remain non-negotiable. Institutions should consult their external auditors on validation expectations.

Governance and Assumption Management

Effective model governance now requires institutions to:

• Demonstrate how assumptions translate to risk.
• Defend assumptions across stress testing and segmentation updates (e.g., downtown vs. suburban CRE).

Hot tip: This might be a good time to revisit your segmentation strategy and consider sub-segmentation where material differences exist (e.g., CRE retail vs. CRE office). Don’t forget to document why your assumptions are still valid or how they’ve changed.

Qualitative Factors (Q Factors)

Q factors must be grounded in data, not based on judgment alone. Risks like tariffs or economic uncertainty now demand more than a one-line explanation. Anchoring and scaling provide the structure and consistency needed to support and defend these adjustments.

Purchase Accounting

The end is near for “double counting” credit losses in purchase accounting. Updates to Purchased Financial Assets (PFAs) aim to

• Improve comparability across acquirers.
• Eliminate confusion around PCD vs. non-PCD treatment.

Hedging Strategies in a Volatile Market

With uncertainty surrounding interest rates, inflation, and economic growth, institutions are leveraging tools like interest rate swaps, options, and futures to reduce earnings volatility and manage balance sheet exposure, but many still hesitate due to perceived complexity.

Key strategies include:

• Fair Value Hedges: Offer real-time P&L recognition and reduce volatility but come with heavy documentation burdens. When done right, strong documentation can enhance risk transparency and strengthen investor confidence.
• Cash Flow Hedges: Help defer impact to earnings and manage forecasted transaction volatility, ideal for uncertain timing of flows.
• Portfolio Layer Method (ASU 2022-01): Simplifies fair value hedge accounting for portfolios with prepayment risk.
• Documentation and effectiveness testing: Clearly define the hedged item, the hedging instrument, and your assessment method to withstand audit scrutiny.

Hot tip: Many institutions only hedge on the asset side. However, strategic use of derivatives on the funding side can access new management opportunities and create a competitive advantage.

Regulatory Reversals and Policy Shifts to Watch

Recent regulatory developments reflect continued volatility spurred by the current presidential administration and signal a broader shift in financial oversight. Key updates include:

Overdraft Rule Reversal and CFPB Budget Cuts

• The repeal of the Consumer Financial Protection Bureau’s (CFPB) so-called “midnight” overdraft rule means that banks with assets exceeding $10 billion are no longer required to adhere to a federally mandated $5 cap on overdraft fees. While this move lifts contentious price control for large financial institutions, it has reignited debate over consumer protection.
• Compounding the overdraft repeal, on June 3, 2025, the U.S. House of Representatives passed a bill to reduce the CFPB’s budget by 70%. The CFPB’s payroll encompassed approximately 50% of its fiscal obligations for 2024. As a result, it would be reasonable to expect other potential rollbacks of CFPB provisions for financial institutions of all sizes.

SAB 122 Signals Easing of Crypto Oversight

• The SEC’s Staff Accounting Bulletin (SAB) 122 rescinds the prior guidance requiring crypto custodians to record a corresponding liability and asset on their balance sheets. This change aims to encourage broader institutional adoption of crypto assets by easing disclosure and fair value rules.
• These developments underscore the need for continued dialogue between regulators and financial institutions around digital asset reporting. While SAB 122 reflects a more accommodative regulatory posture, questions persist regarding the adequacy of current accounting frameworks.

HUMPS Act to Modernize CAMELS Framework

• Still in its early stages, the Halting Uncertain Methods and Practices in Supervision (HUMPS) Act of 2025 proposes a significant overhaul of the CAMELS rating system, first introduced in 1978. The legislation seeks to make supervisory evaluations more objective and criteria-based.
• A key focus of the bill is the potential reform or removal of the subjective “Management” component to reduce examiner bias and improve consistency and transparency.

Hot tip: Given the pace and unpredictability of regulatory change, institutions should carefully assess their risk appetite and operational flexibility. This includes:

• Preparing for potential reversals in CFPB compliance expectations.
• Evaluating crypto asset onboarding strategies.
• Reassessing succession planning tied to CAMELS ratings.

We Can Help

At Elliott Davis, our Financial Services Group helps institutions turn uncertainty into opportunity. We offer tailored support across key areas, including:

• CECL framework refinement and model validation
• Hedge accounting strategy support
• Interpretation of PFA updates
• Regulatory impact assessments (e.g., CFPB, SEC)
• Digital asset onboarding (accounting treatment, custody controls, disclosure readiness)
• Governance, documentation, and audit readiness

Download our PDF from the webinar, watch the full webinar replay below, or contact our team today to start the conversation.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.

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