Intellectual Property Risk for Financial Institutions

As the digital transformation in the banking industry continues to accelerate, with many transitioning to online business models and the provisioning of technology services to customers, there will likely be a growing issue of intellectual property infringement cases and impending litigation.

Several large U.S. financial institutions and banks have purchased Intellectual Property (IP) insurance in the last few years. This was mainly triggered by the long-running set of patent disputes brought by financial services firm United Services Automobile Association (USAA) over mobile check deposit technology. The USAA has sued a number of banks and has sent warning letters to approximately 100 others. The article, Strategy Lessons From Wells Fargo Fintech Patent Litigation1, summarizes their seminal case against Wells Fargo.

The continued drive for banks to develop digital solutions to compete for customer wallet share and cut operating costs has seen the rapid rise of banks partnering with fintechs. In seeking to evolve their digital offerings, financial institutions often work with hundreds of suppliers to help them deliver the required IT functionality. Banks often don’t use their own proprietary technology and rely on that provided by third parties, which is then used under various contractual and licensing agreements. We are now seeing software developers take a more proactive approach to protecting their IP. The number of technology patents in place and the complex and technical considerations required to determine exactly what’s protected by each one make it easy for companies to infringe on patents.

The number of bank branches in the U.S. has been steadily declining, driven by factors like online and mobile banking, bank cost-cutting measures and a shift in customer preferences. Between 2012 and 2022, the number of bank branches in the U.S. decreased by 16%, from 82,461 to 69,590. Some predictions suggest that the last physical bank branch could close by 2041 if the current closure rate continues.²

This shift towards streamlining physical corporate footprints and growing their portfolio of intangible assets will further accelerate exposure to IP infringement litigation.

In January 2025, USAA filed its most recent lawsuit against competitor Regions Bank in Texas federal court, alleging that Regions’ mobile banking application infringes on its patents for remote check-deposit technology.