New York tells banks to find their single points of failure

New York regulators are tightening the screws on how financial institutions manage their third-party partners. This move by the Department of Financial Services (DFS) specifically targets 'single points of failure.' Regulators now expect banks and lenders to identify if too many of their critical operations rely on a single vendor. For retailers and operators, this directly impacts your financing partners. If your primary lender relies on one specific software or cloud provider for their underwriting and credit decisions, they are now under pressure to prove that a glitch at that vendor won't freeze your customers' ability to get financing. This guidance moves beyond basic vendor management. It requires lenders to look at the 'hidden' links in their supply chain. For example, if your BNPL provider and your secondary lease-to-own provider both use the same credit reporting tool or cloud server, a single outage could shut down all your financing options at once. Lenders will likely start asking their merchant partners for more data, or they may change their backup systems to comply with these New York standards. Expect your financing partners to become more rigorous about their own stability, which could lead to updates in service level agreements or even shifts in which technology stacks they use to power your point-of-sale applications.

Source: American Banker — Top News

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