Managing the Risks of White Labelling in Financial Services

& Why Governance Can’t Be an Afterthought

White labelling in financial services has emerged as a powerful growth engine, enabling banks to reach new customer segments through partner brands and embedded finance channels. According to the European Banking Authority (EBA) 2025 report, over a third of EU banks already offer white-labelled products across accounts, cards, Buy Now Pay Later, and data-driven services. While this model accelerates distribution and market reach, it also introduces significant operational and compliance risks if governance is not carefully structured.

Why Governance Matters:
Embedded and partner-led finance thrives because it meets customers where they already spend time: in marketplaces, mobility apps, or super apps. However, each partner adds a layer of complexity. Without clear governance, risks such as confused customer identity, fragmented responsibilities, fraud vulnerabilities, and cross-border compliance challenges can quickly escalate. The EBA emphasises that regulators are now expecting evidence of active oversight, not just static documentation, with a focus on protecting customers and ensuring operational resilience.

Industry experts support this view. For example, PwC highlights that effective third-party risk management and integrated governance frameworks are essential to manage operational, regulatory, and reputational risks in embedded finance partnerships. Similarly, FinExtra notes that fragmented operations and inconsistent messaging are major sources of risk in white-labelled arrangements, reinforcing that continuous oversight and transparency are key to maintaining trust.

Common Risks in White Labelling:

1. Transparency and Accountability: Customers often do not know which institution is the regulated provider, which can lead to confusion regarding complaint resolution, contractual responsibilities, and fraud prevention.

2. Operational and Security Risks: Increased third-party integrations and data sharing across partners heighten the risk of cyberattacks and compliance breaches. Fragmented systems can make it harder to detect anomalies or fraudulent activity.

3. Third-Party Concentration: Heavy reliance on a single partner, or on multiple partners across different jurisdictions, can amplify operational and regulatory risk, particularly if roles and responsibilities are not clearly defined.

4. Regulatory Complexity: Divergent national regulations and supervisory practices create legal uncertainty, increasing the likelihood of misalignment or regulatory findings.

What Regulators Expect:

The EBA 2025 report signals that supervisory priorities in 2026 will focus on whether financial institutions can demonstrate clear accountability across all white-labelled products, validate the effectiveness of customer disclosures, and show governance as a living, continuously monitored process rather than a static policy document. Firms that fail to operationalise these principles risk regulatory findings, reputational harm, and erosion of customer trust.

Best Practice Steps to Mitigate Risk:

• Develop clear accountability maps for all partner activities, including KYC, AML, and complaint handling.

• Implement continuous monitoring of third-party relationships to detect compliance breaches or operational failures in real time.

• Test customer disclosures regularly to ensure clarity of provider identity and complaint routes.

• Harmonise governance frameworks across borders to ensure consistent compliance and oversight.

Key Takeaway:

Governance is not a compliance checkbox; it is a strategic enabler for safe growth in white-labelled financial services. Organisations that operationalise oversight, clarify responsibilities, and continuously monitor their partner networks can unlock the full potential of embedded finance while protecting customers and mitigating regulatory risk.

To explore real-world examples and actionable governance strategies, download our comprehensive whitepaper, “White Labelling in Financial Services: Unlocking Opportunity, Managing Risk”, and learn how leading banks are balancing growth and risk in today’s evolving market.