A new Treasury Department report found as the trend of nonbank fintech companies providing financial services in partnership with regulated entities continues to grow, banking regulators need to increase oversight of these relationships to curb the risks they pose to the market and consumers.

The report, “Assessing the Impact of New Entrant Nonbank Firms on Competition in Consumer Finance Markets,” recommended U.S. banking regulators should provide a “clear and consistently applied supervisory framework for bank-fintech relationships” in response to potential risks and increased competitive pressures posed by nonbank fintechs to the consumer financial market.

The framework would likely be based on risk management guidance proposed in July 2021, in which the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency offered guidance to financial institutions about how to enter into business relationships with third parties, including fintechs. Wednesday’s Treasury report recommended banking regulators finalize last year’s proposal.