Metropolitan Commercial Bank announced in its 2023 annual report that it will be winding down its banking-as-a-service program in early 2024. This decision comes as the New York City community bank aims to reduce its exposure to evolving regulatory standards and reevaluate its involvement in these partnerships. The bank’s move follows similar actions by other financial institutions, as they navigate the complex regulatory landscape surrounding banking-as-a-service.
In a strategic shift, Metropolitan Commercial Bank is exiting all banking-as-a-service relationships, including consumer-facing partnerships. This decision reflects the challenges faced by banks in interpreting and adhering to regulatory guidelines, which are often enforced rather than clearly defined. Blue Ridge Bank, for example, recently offboarded several fintech partners in response to regulatory actions.
This is not the first time Metropolitan Commercial Bank has made a significant change in its Business strategy. In 2023, the bank completed its exit from the digital currency business, highlighting its willingness to adapt to regulatory scrutiny and industry shifts. Despite losing a significant portion of deposits acquired through banking-as-a-service relationships, the bank expects minimal financial impact from this decision.
Mark Fitzgibbon, head of financial strategies group research at Piper Sandler, views the bank’s decision as a double-edged sword. While exiting the banking-as-a-service business may alleviate regulatory challenges, it also removes a key growth driver for the institution. In October, Metropolitan Commercial Bank agreed to a $30 million settlement with regulators for failing to prevent fraud in a prepaid card program during the pandemic, underscoring the importance of regulatory compliance in financial services.
As the banking industry continues to navigate regulatory complexities, Metropolitan Commercial Bank’s decision to exit its banking-as-a-service program reflects a wider trend among financial institutions. While this move may simplify the bank’s operations, it also raises questions about its growth prospects and competitive positioning in the market.
Read More Business News
