The First Filter: How Banks Can Identify High-Risk Fintechs Early

As banks scale their fintech partnerships—often managing anywhere from 6 to 100 collaborations—the complexity of conducting in-depth risk assessments for each one becomes increasingly difficult. While rapid onboarding may excite business teams, compliance teams face a challenge: how to ensure each fintech partner meets the necessary regulatory standards without a drawn-out process.

At Across, we’ve developed a solution to this challenge: the Pre-DD (Pre-Due Diligence) phase. This initial assessment helps quickly identify whether a fintech partner meets the minimum engagement standards, enabling you to flag significant risks early and streamline the onboarding process.

The Pre-DD Process: A critical first step

The Pre-DD phase gathers critical information through a standardized intake form. The following areas are assessed:

Business Profile

At this stage, we look at who the fintech company serves, where it operates, and how its products fit into the wider financial ecosystem. This includes identifying whether the focus is on B2B, B2C, or niche segments, and whether services extend to cross-border payments or cryptocurrency. Transaction volumes and fund flows are reviewed to ensure they align with the stated business model.

Regulatory and Compliance Standing

A fintech’s ability to operate within regulatory frameworks is a critical indicator of long-term stability. Here, we verify that the required licenses are in place and assess whether the organizational structure supports sound governance. We also check for the presence of compliance infrastructure such as SOC audits, external reviews, and dedicated compliance teams.

Financial and Operational Capacity

Strong financial footing is essential for a fintech’s ability to scale and sustain operations. We assess available resources, funding strength alongside the fintech’s capacity to handle their projected growth. Operational elements such as the breadth of payment instruments offered and scalability plans are also reviewed to determine whether growth targets are realistic or overly ambitious.

Ownership and Shareholding Structure

Clear and transparent ownership is vital to assessing both regulatory risk and reputational exposure. We examine the shareholder structure to identify beneficial owners, concentration of control, and potential conflicts of interest. Lack of clarity in this area often points to hidden risks such as undisclosed investors, governance weaknesses, or exposure to politically exposed persons (PEPs).

Spotting Red Flags Early

The Pre-DD phase is designed to highlight warning signs that could signal significant future risks. By surfacing these issues early, banks can avoid costly deep-dive assessments on fintechs that are unlikely to meet regulatory or operational standards. Common red flags include:

• Unclear Business ModelsFintechs that cannot clearly articulate their product offering, monetization strategy, or scalability often present higher risks. Models involving high-risk products—such as unlicensed lending or unregulated crypto derivatives—are particularly concerning.
• Unrealistic ForecastsOverly aggressive projections, short launch timelines, or growth plans that lack supporting infrastructure suggest the fintech may not have a sustainable strategy.
• Compliance GapsWarning signs include missing or unaudited financial statements, insufficient compliance budgets, or reliance on a single investor to sustain operations. These gaps may expose the fintech—and its banking partners—to regulatory scrutiny.
• Operational RisksComplex or opaque fund flows, reliance on non-segregated accounts, or unclear transaction processes can create vulnerabilities in daily operations.
• Legal and Security IssuesMissing legal documentation, unclear ownership structures, or weak cybersecurity measures (e.g., lack of multi-factor authentication) indicate poor governance and weak controls.
• Concerns from Past Partnerships / Adverse MediaA history of abruptly terminated partnerships, unresolved legal disputes, or reputational damage can be an early indicator of recurring issues.

The Strategic Advantage of Early Risk Detection

By identifying red flags early in the process, the Pre-DD phase enables banks to make informed go/no-go decisions much sooner. With fintech partnerships growing in number, the Pre-DD

phase helps focus due diligence efforts on high-potential partners and prevents wasting time and resources on high-risk fintechs.

Banks with 10-50 fintech partnerships can avoid costly, time-consuming full assessments for unfit partners, allowing them to focus on those that align with their long-term goals. Moreover, this approach helps build a pipeline of fintechs that match the bank’s risk appetite and compliance requirements.

Take the First Step in Risk Management

In today’s fast-paced digital finance landscape, efficiently managing fintech partnerships is key to staying ahead. Implementing a Pre-DD process helps ensure that you’re onboarding the right partners while minimizing risk. Reach out to us at Across to learn more about how our Pre-DD phase can optimize your fintech partnership strategy.