Fintech Vendor Due Diligence Checklist

A fintech vendor due diligence checklist systematically evaluates financial technology providers across security controls, data handling practices, regulatory compliance, and operational resilience. Download our 200+ point checklist covering SOC 2, PCI DSS, GDPR requirements, API security validation, and financial-specific risk indicators to replace manual assessments with structured evidence collection.

Key takeaways:

• Maps directly to SOC 2 trust services criteria, ISO 27001 controls, and PCI DSS requirements
• Includes fintech-specific sections: open banking compliance, payment processing security, algorithmic risk
• Automates evidence collection for most standard DDQ questions
• Risk-tiers vendors based on data sensitivity, transaction volume, and system criticality
• Reduces assessment time from 3 weeks to 3 days per vendor

Fintech vendors process sensitive financial data, handle payment transactions, and integrate deeply with your core systems. Standard IT vendor assessments miss critical risks: algorithmic bias in credit decisioning, PSD2/open banking compliance gaps, or real-time fraud detection failures.

This checklist transforms scattered compliance requirements into actionable assessment criteria. Each control links to specific evidence requests, acceptance thresholds, and compensating controls. You'll evaluate vendors consistently whether they're payment processors, lending platforms, wealth management tools, or embedded finance providers.

Built from 500+ fintech assessments across banking, insurance, and investment firms, this framework addresses the unique intersection of financial regulations, data privacy laws, and technology standards that define modern financial services risk.

Core Assessment Categories

1. Regulatory Compliance & Licensing

Financial technology vendors operate under multiple regulatory umbrellas. Your checklist must verify:

Banking & Payment Regulations

• PSD2 strong customer authentication (SCA) implementation
• Electronic Money Institution (EMI) or Payment Institution (PI) license verification
• Bank Secrecy Act (BSA) / Anti-Money Laundering (AML) program documentation
• SWIFT CSP compliance for payment processors

Evidence Collection Requirements:

Regulation	Required Documents	Validation Method
PSD2	Technical documentation for SCA, API security certificates	Code review, penetration test results
EMI/PI License	License certificates, regulatory correspondence	Direct verification with regulator database
BSA/AML	Written program, training records, SAR filing procedures	Independent audit reports

2. Data Protection & Privacy Controls

Fintech vendors handle multiple data categories requiring different protection levels:

Structured Assessment Points:

• Encryption standards for data at rest (AES-256 minimum)
• API authentication mechanisms (OAuth 2.0, mutual TLS)
• Cross-border data transfer mechanisms (SCCs, BCRs, adequacy decisions)
• Right to erasure implementation for GDPR Article 17
• California Consumer Privacy Act (CCPA) compliance for US operations

Control Mapping Example:

SOC 2 CC6.1 (Logical Access Controls) → 
- Multi-factor authentication for privileged accounts
- API key rotation every 90 days
- Session timeout after 15 minutes of inactivity
- Failed login attempt monitoring and alerting

3. Technical Security Architecture

API Security Assessment Fintech integration happens through APIs. Evaluate:

• Rate limiting implementation (requests per second, per API key)
• Input validation against OWASP Top 10 API vulnerabilities
• API versioning and deprecation procedures
• Webhook security (HMAC signatures, IP allowlisting)

Infrastructure Security

• Cloud provider SOC reports (AWS, Azure, GCP)
• Container orchestration security (Kubernetes RBAC policies)
• Infrastructure as Code (IaC) scanning results
• Network segmentation between customer environments

4. Operational Resilience

Business Continuity Planning

• Recovery Time Objective (RTO) for critical services: ≤ 4 hours
• Recovery Point Objective (RPO) for transaction data: ≤ 1 hour
• Geographic redundancy across availability zones
• Annual disaster recovery test results

Incident Response Capabilities

• Mean Time to Acknowledge (MTTA): ≤ 15 minutes for critical incidents
• Security incident notification SLA: ≤ 72 hours
• Root cause analysis delivery: ≤ 5 business days
• Customer-specific runbooks for service degradation

5. Financial Stability Assessment

Vendor Viability Indicators

• Audited financial statements (last 2 years)
• Burn rate vs. runway calculations
• Key investor due diligence reports
• Credit rating agency assessments
• Cyber insurance coverage limits and exclusions

Industry-Specific Applications

Banking & Credit Unions

Focus areas: Core banking integration security, FFIEC compliance, real-time payment processing

Additional controls:

• FFIEC CAT tool alignment
• Regulation E dispute handling procedures
• NACHA compliance for ACH processing
• Federal Reserve connectivity requirements

Insurance Companies

Focus areas: Actuarial data protection, claims processing security, state regulatory compliance

Additional controls:

• NAIC model law compliance
• Protected Health Information (PHI) handling under HIPAA
• State insurance data security laws (e.g., NY DFS 23 NYCRR 500)

Investment Management

Focus areas: Trading system security, market data integrity, SEC compliance

Additional controls:

• SEC Regulation S-P requirements
• FINRA cybersecurity obligations
• Best execution audit trails
• Market manipulation detection systems

Implementation Best Practices

1. Risk-Tier Your Vendors First

Tier 1 (Critical): Core processing, payment systems, customer authentication

• Full checklist implementation
• Quarterly reassessment
• Continuous monitoring required

Tier 2 (High): Data analytics, loan origination, wealth management

• the majority of checklist items
• Semi-annual reassessment
• Monthly security posture updates

Tier 3 (Medium): Marketing tools, non-critical APIs

• a substantial portion of checklist items
• Annual reassessment
• Quarterly attestation updates

2. Automate Evidence Collection

Manual collection points that kill efficiency:

• Security questionnaire responses
• Certificate expiration tracking
• Policy document updates
• Audit report collection

Automation opportunities:

• API-based certificate validation
• Automated questionnaire pre-population from previous assessments
• Public filing monitors for financial health
• Regulatory database integration for license verification

3. Create Conditional Logic Paths

Not every vendor needs every question. Build logic rules:

If vendor handles payment card data → Trigger PCI DSS section If vendor stores EU personal data → Trigger GDPR section If vendor provides investment advice → Trigger SEC/FINRA section

Common Implementation Mistakes

1. Over-Assessing Low-Risk Vendors Sending 400-question DDQs to marketing analytics vendors wastes everyone's time. Match assessment depth to actual risk exposure.

2. Accepting Stale Evidence SOC 2 reports older than 12 months don't reflect current controls. Penetration tests over 18 months old miss recent vulnerabilities.

3. Ignoring Compensating Controls Smaller fintech vendors might lack enterprise features but compensate through:

• More frequent third-party audits
• Narrower permission scopes
• Manual review processes for high-risk transactions

4. Focusing on Compliance Over Risk Checking boxes doesn't equal security. A vendor can pass every compliance check while maintaining poor operational practices.

5. Static Annual Reviews Fintech vendors evolve rapidly. Quarterly control validation for critical vendors prevents surprise failures.

Frequently Asked Questions

How do I handle fintech startups that lack SOC 2 reports or ISO certifications?

Request alternative evidence: penetration test results from recognized firms, AWS Well-Architected Review reports, or detailed architecture documentation. Set certification requirements as contract milestones within 12 months.

What's the minimum viable checklist for a proof-of-concept with a fintech vendor?

Focus on data classification, API security controls, and infrastructure basics. Use a 25-point abbreviated checklist covering authentication, encryption, and incident response. Full assessment comes before production data access.

Should cryptocurrency and blockchain vendors use the same checklist?

Start with the base checklist but add sections for smart contract audits, key management procedures, and blockchain-specific risks. Consider adding controls for wallet security, consensus mechanism risks, and regulatory uncertainty.

How do I assess embedded finance providers that white-label services from other fintechs?

Require transparency about fourth-party relationships. Assess both the direct vendor and their critical subprocessors. Include pass-through liability clauses and audit rights for the underlying providers.

What evidence should I collect for algorithmic decision-making in lending or fraud detection?

Request model validation reports, bias testing results, explainability documentation, and adverse action notice procedures. Include fairness metrics and demographic parity analysis where applicable.