By Philipp Buschmann, Co-Founder and CEO at AAZZUR
The Banking-as-a-Service (BaaS) sector is shifting yet again, with some big players bowing out and sparking fresh questions about what’s next. For businesses depending on BaaS to offer financial services, the big question isn’t “Is BaaS stable?”—it’s “How do we build resilience in this fast-changing space?” The answer lies in learning from past disruptions, diversifying partnerships, and keeping your operations flexible, no matter what the market throws your way.
The Resilience Factor in BaaS
BaaS isn’t the first industry to experience some growing pains. The Wirecard collapse in 2020 was a stark reminder of the risks involved with over-reliance on a single provider. Overnight, businesses reliant on Wirecard’s infrastructure were cut off from essential financial services, and their customers suddenly had no access to funds. It was a hard lesson in the importance of risk management, and today, as the BaaS landscape evolves, it’s one that businesses should keep in mind.
The lesson here isn’t that BaaS is unstable, but rather that businesses should be prepared to adapt. The financial services space has always been heavily regulated and fiercely competitive, so it’s no surprise that not all providers will make it in the long run. The key for businesses is to take proactive steps to protect themselves from the impact of these inevitable shifts.
BaaS: A Model Under Pressure
The BaaS sector is still growing and evolving, and it’s certainly not on the verge of collapse. But the market dynamics have shifted, and those changes bring challenges. Tighter regulations, for example, put more pressure on partner banks involved in BaaS, meaning they’ll face closer scrutiny than traditional banks. Additionally, investors are no longer impressed by “growth at all costs.” Today, there’s a new standard: sustainable, profitable growth. With margins already slim in the BaaS industry, this profitability expectation brings added pressure on providers to deliver stability alongside growth.
For businesses, these shifts mean looking at their own risk strategies within BaaS. Companies should approach BaaS not as a “set it and forget it” solution, but as a powerful tool that requires strategic planning and adaptability.
Building Resilience Through Diversification
So, how can businesses protect themselves in a space as dynamic as BaaS? One way is through diversification—working with multiple service providers instead of relying on just one. When Wirecard collapsed, we saw a clear example of how businesses with diversified structures fared better. Take Curve and N26: N26 had its own banking licence and continued operations uninterrupted. Curve, however, relied on Wirecard’s licence and faced service disruptions.
For many businesses, securing a banking licence isn’t feasible, but having multiple provider relationships is. This approach spreads risk and allows companies to remain flexible and responsive to sudden changes in the BaaS landscape.
The Flexibility Advantage in Fintech
BaaS is a powerful enabler for fintechs and digital businesses, allowing them to offer banking services, lending, and card issuance without building a full banking infrastructure. However, as these companies grow, so does the complexity of their operations. Today’s fintechs may start with one or two core services but quickly expand into areas like lending, KYC processes, and insurance.
Scaling up used to mean juggling a complex tech stack and managing numerous provider relationships, but advancements in fintech platforms now allow for seamless integration with multiple BaaS providers. Flexible platforms let businesses add new providers or switch between them without major disruptions. For example, a company might start by partnering with a single payments provider and later add a lending partner, or an insurance offering, through additional BaaS providers—all while keeping their core infrastructure intact.
This ability to easily adjust providers and offerings provides not only resilience but agility. With a flexible setup, companies can more easily expand into new markets or pivot services to adapt to evolving customer demands or regulatory changes.
Futureproofing in an Evolving Industry
In the fast-paced fintech environment, relying on just one provider limits both the services a company can offer and the markets it can operate in. By working with multiple providers, businesses can shield themselves from unexpected shifts, gain operational flexibility, and expand their offerings. This approach is particularly helpful for businesses wanting to enter new markets or add new features without reinventing their tech infrastructure.
The recent exits of several BaaS providers serve as a reminder that while BaaS is powerful, it requires proactive risk management. For digital businesses looking to leverage embedded finance, a multi-provider approach not only spreads risk but also enables them to stay agile and scalable. By keeping partnerships diversified, fintechs can maintain a competitive edge and ensure continuity, even in times of change. When selecting a provider, it’s essential to look beyond just cost and evaluate other, often subtler, factors. Prioritising long-term alignment ensures a partnership that delivers enduring value and shared goals.
BaaS in the Long Run
BaaS is not a passing trend. It has revolutionised how businesses—big and small—access and offer financial services. But like any rapidly growing sector, it needs to adapt to survive. The companies that will thrive in the future of BaaS are those that treat flexibility and resilience as non-negotiable. By diversifying provider relationships, companies can tap into the full potential of BaaS without exposing themselves to undue risk.
Ultimately, BaaS democratises access to financial services, enabling businesses of all sizes to compete with traditional financial institutions. For companies with a solid, flexible approach, BaaS remains a game-changing model that opens doors to markets, customers, and revenue streams thatwere once out of reach.
It’s evolving, not collapsing. And for businesses that can adapt to these changes, the opportunities are endless. With the right strategies in place—focusing on resilience, flexibility, and partnerships—BaaS will continue to be a driving force in the fintech landscape, allowing businesses to innovate, expand, and future-proof their operations.
About Author:
Philipp Buschmann is co-Founder and CEO at AAZZUR, a one-stop-shop for smart embedded finance experience. Recognised as a rising star in the FinTech space, AAZZUR’s mission is to build profitable banking whilst at the same time empowering consumers to have access to better informed financial choices.
Philipp is a serial entrepreneur with extensive experience of working in Challenger Banking, Financial Services, IT and Energy across the world. He took one of his businesses public – Ignis Petroleum was publicly listed in the US and Germany.
Having started as a developer in Financial Services, Philipp has first-hand experience of the banking revolution from both a technology and financial perspective. His interest in behavioural economics helped inspire AAZZUR’s revolutionary work on customer centricity in banking.
Philipp holds an MBA from the London Business School. He is passionate about entrepreneurship and loves exchanging ideas, insights and discussing FinTech’s future. He has spoken at major Fintech events including Money 20/20, MoneyLive, Finovate, Fintech Matters, and the Future of Retail Banking.
