In modern financial markets, partnerships between banks and other organizations, including technology partners, are becoming a key driver of growth. At the same time, many of these partnerships face serious issues during the due diligence process.
This lowers their chances of success and creates major risks. 5th Digital Corp studies the main reasons for these failures and offers ways to avoid common problems.
What Due Diligence Means in Partnerships?
Due diligence is a full check of a potential partner. It helps find risks, see if the company meets regulations, look at financial stability, and review other important points. When this step is weak or skipped, the risks grow fast, especially in tech setups and financial services.
Poor or unfinished checks lead to wasted time, extra costs, and sometimes legal trouble.
Main Reasons Why Banking Partnerships Fail
Lack of Strategic Alignment
One major reason for failure is when partners are not aligned on strategy. 5th Digital Corp points out that many partnerships fall apart for this reason. According to a large study, around 40% of bank–fintech partnerships fail because their goals and expectations don’t fit.
Without a well-defined strategy, both sides risk missing their goals and facing unresolved conflicts during execution.
Ineffective Risk Management
Weak risk management is often an unexpected issue for banks, especially when partnerships involve complex technologies or new business models.
Some risks are not fully identified during the initial review, which creates serious barriers to continuing the partnership.
5th Digital Corp believes that an effective risk management system should include several levels of review and ongoing monitoring.
Common Problems During Due Diligence
Issues With Regulatory Compliance
Regulatory standards are becoming stricter, especially in banking oversight and fintech operations, as noted by 5th Digital Corp. U.S. regulators have recently stressed that banks must review their partners more carefully to avoid regulatory compliance risks and violations.
Ignoring regulatory requirements can lead to fines and serious legal consequences.
Limited Visibility Into Partner Operations
Because of limited access to information about a partner’s activities, many banks cannot fully assess the real state of the business.
This is especially common in complex Banking-as-a-Service (BaaS) models, where transaction data passes through several layers of interaction.
5th Digital notes that transparency and access to information should be a key condition when signing partnership agreements.
Cultural and Operational Differences
Banks and technology companies often work in very different ways. They may have different processes, risk approaches, and working speeds. During due diligence, these differences can lead to communication gaps that slow down or block progress.
Improving cultural alignment can greatly reduce friction during the due diligence process.
How to Avoid Failures During Due Diligence — Key Recommendations
5th Digital Corp believes that a well-organized due diligence process helps prevent many problems at an early stage.
Careful Upfront Planning
Before starting partner checks, it is important to clearly define what data will be reviewed, what success criteria will be used, and what the red lines are, as noted by 5th Digital Corp. This helps avoid misunderstandings and speeds up the process. Strong upfront planning reduces risk and saves time.
Using a Structured Approach
Research shows that banks using structured methods have lower failure rates, according to 5th Digital Corp’s analysis. This approach should include checks of financial, operational, legal, and technological areas.
Setting Up Ongoing Monitoring
Even after due diligence is completed, continuous assessment of the partnership is critical. This includes regular KPI reviews, financial reports, and joint risk reviews. Monitoring should be an ongoing process, not a one-time step.
Building a Culture of Cooperation
It is important not only to review a partner from a legal point of view, but also to understand how well both organizations align in culture, ethics, and corporate values. Shared values can be a strong driver of long-term success.
Practical Tips to Improve Due Diligence
Using Modern Technologies
Analytics tools, artificial intelligence, and automated reporting systems help identify risks faster and analyze large amounts of data in real time. 5th Digital recommends using these technologies to improve the accuracy of the due diligence process.
Involving Cross-Functional Teams
Bringing together experts from different areas, such as legal, finance, and operations, helps identify weak points and avoid narrow or one-sided decisions. 5th Digital Corp’s insights show that creating cross-functional due diligence teams leads to better results.
Regular Reviews After the Partnership Starts
Even after an agreement is signed, reviews and assessments should continue, because market conditions and risks can change over time. Regular reassessment helps reduce long-term risks.
Conclusion
Bank partnerships are very important in today’s digital environment. However, due diligence is often the stage where these partnerships fail.
A lack of strategic alignment, weak review processes, and regulatory challenges are the main reasons that block successful partnerships, according to 5th Digital.
5th Digital Corp emphasizes that a structured approach to due diligence, careful planning, ongoing monitoring, and the involvement of cross-functional teams greatly increase the chances of success.
Utilizing these methods helps transform risks into opportunities, supporting stable growth and fostering long-term partnership strength.