JPMorgan Chase and Bank of America are reportedly teaming up to create a group that will help them manage risks associated with FinTech partnerships.
According to a Tuesday (Nov. 14) report in Bloomberg, the collaboration, dubbed TruSight, will be up and running in the first quarter of 2018 and also includes American Express and Wells Fargo as founders, according to Abel Clark, TruSight’s chief executive officer.
The venture will help the banks reduce the risks that accompany partnering with suppliers and partners.
“The cost of third-party risk management has risen sharply,’’ said Clark in the Bloomberg interview. “There really is a critical need to transform the risk and effectiveness of third-party risk management.”
While financial institutions (FIs) in the U.S. originally pushed back against FinTechs, they have since increasingly embraced the tech-focused firms as partners in areas such as digital payments and fraud prevention.
To vet their FinTech partners, banks traditionally give the financial startups a 300-question survey and do more due diligence through phone calls, emails and website visits. The process can take weeks, if not months, but TruSight will shorten the process.
The collaborative of banks is working to create a standardized approach to handling partnership vetting for these FinTechs.
“Risk events are becoming more common and more sophisticated, so it’s clear institutions need to make sure that they — and their partners — are managing this risk,’’ Clark said.
The new TruSight group is being developed during a time when computer hacks and data breaches are occurring at an increasingly regular rate. The financial markets are still reeling from the massive hack of credit scoring company Equifax, a cyberattack which put more than 145.5 million customers’ personal information at risk. The hackers also gained access to account information for 209,000 credit cards during the cybersecurity event.
TruSight wants to ensure the FinTechs with which banks partner will keep customer data safe and protected.