Sponsor banks are growing fast, and so is the risk workload that comes with it. In a recent conversation hosted with The BaaS Association, Coverbase's Danny Higdon and FedFis's Tanner Mayo broke down why the standard TPRM playbook falls short for embedded finance, and what's replacing it. Below are the key takeaways, with the full recording embedded at the end.

The Embedded Banking Boom

A traditional vendor relationship is fairly contained: one company, one set of controls, one contract. A sponsor bank program isn't. It touches compliance, data access, infrastructure, and often several layers of subprocessors the bank never directly contracted with. That means more document types, more open questions, and more places for something to slip through, and it's compounding as the market grows. There are now 159 active sponsor banks supporting 708 fintech programs, both up from last quarter, and embedded finance is expected to grow faster over the next 30 months than it did over the last decade.

The 60 Day Bottleneck

It's rarely one single thing. Four problems tend to compound on each other: chasing documentation from the vendor or partner, reading and logging what comes back, following up on the issues that surface, and relying on a once a year snapshot instead of an ongoing view. None of this points to a lack of effort. It points to a process built for a slower, simpler generation of vendors.

Does asking fewer questions actually work?

Yes, when the ask changes rather than the standard. Banks don't need to renegotiate their risk policy to move faster. A control like "vendors need a password rotation policy of 90 days or less" doesn't change. What changes is how it gets verified. Instead of sending 300 to 500 questions and waiting on answers, leading programs are requesting evidence and documentation upfront, then validating the response against it. That single shift cut response times by 78% in one comparison.

The Results: 60 Days to 10

In one of Coverbase's case studies, Thread Bank took vendor onboarding from 60 days down to 10, an 83% reduction. Risk assessments ran 90% faster, and the bank saved more than $92,000 a year, without adding headcount.

From Reactive to Proactive Monitoring

Most third party risk today is reactive. A breach happens, a vendor's status page goes dark, or a key provider's stock drops, and the bank finds out days later. The alternative is building monitoring around plain language rules that watch both external signals, like dark web activity or vendor uptime, and internal signals through read only, permissioned checks of a partner's own configuration pages, catching things like MFA silently being turned off for a subset of users before it becomes a real problem.

Where AI Actually Helps

Four places, consistently. Intake, where onboarding questionnaires get filled out alongside the partner instead of cold, cutting a two day form down to minutes. Document review, pulling specific answers out of hundreds of pages of SOC 2s and policy docs instead of reading them line by line. Monitoring, turning a flood of external data into alerts that are actually relevant. And reporting, replacing manual spreadsheet work with audit ready reports on demand. In every case, a person still makes the final call. The goal isn't replacing risk analysts, it's giving them back the time currently spent on admin work instead of judgment calls.

What should a growing sponsor bank program do next?

Start with a few honest questions. How do you currently decide inherent risk on a new program? How long does evidence collection actually take? And if a regulator asked you to justify a decision tomorrow, could you show your work in minutes, not days? If the answer to any of those is uncomfortable, that's usually the place to start.