Fintech startup Checkbook began with the promise to help banks eliminate paper checks and transformed itself into an international payments company that leveraged a relationship with JPMorgan Chase to give all manner of customers access to the U.S. financial system.
JPMorgan recently told Checkbook it was winding down its relationship with the firm rather than face the regulatory risks associated with handling some of those customers, which included Venezuelan crypto startups. And last week Checkbook replaced its CEO, who had been placed on leave in the fall around the same time the company discovered potential reconciliation issues with its ledgers.
JPMorgan, which invested in Checkbook in 2021, has removed the company from a payments network it runs and deleted references to Checkbook from a webpage that listed more than a dozen of the bank’s “strategic investments.”
The issues at Checkbook underscore the risks banks face when partnering with financial intermediaries that provide avenues for other fast-growing firms, such as crypto companies or global payment companies, to leverage bank technology for connecting to the traditional financial system.
Adam Zarazinski, CEO of risk analytics firm Inca Digital, said there’s been a convergence of crypto infrastructure, payments companies and card networks that can move money quickly between countries, making it increasingly difficult for banks to know who their customers are. “Each layer performs old-school diligence on the entity directly in front of it, but often no single participant has full visibility into the end-to-end use case,” Zarazinski said.