Where Banking as a Service is Heading, and How Your Bank May Fit Its Future

By Jason Mikula, publisher, Fintech Business Weekly

Published on November 4th, 2026 in Banking-as-a-Service

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At the beginning of the decade, “banking-as-a-service” was viewed by some as a win-win-win:

• Smaller community banks could source cheap deposits and earn fee revenue.

• Fintech programs could launch more quickly and inexpensively.

• A new crop of “middleware” technology service providers could cash in by making it all possible.

Where BaaS stands: Six years on, many of those promises have been broken, a number of banks have wound down their fintech partner business lines, and several middleware platforms have ceased to exist.

What does the future hold for yesterday’s win-win-win?

Let’s look at the current state of banking-as-a-service and the key forces shaping where it’s going.

Need to Know:

Federal banking regulators are widely perceived to be refocusing supervision efforts on material financial risks, leading some partner banks to take a more “risk on” posture.
Still, the banking-as-a-service model can still pose real risks to financial institutions and to customers: Coastal Community Bank’s recent earnings miss, driven by a write-down of the value of credit enhancements tied to a fintech lending partner, demonstrates banks must continue to monitor the risks in their program portfolios.
The opening of the “charter window” under current regulators forces an uncomfortable question for partner banks: What happens if your best programs leave?
Middleware providers that drove significant program volume by facilitating bank-fintech relationships have receded in importance.
The growth of stablecoin-based global-by-default banking services offers new opportunities — and new risks — for banks that help enable them.

“Risk on,” If Your Bank is Ready For It

The current crop of federal banking regulators has moved to refocus supervision more squarely on measurable, material financial risks. “Reputation risk” is explicitly out.

And some of the kinds of “check-the-box” misses that contributed to more than a dozen BaaS-related enforcement actions seem likely to get less scrutiny from current regulators.

However, regardless of what is and is not important in Washington, D.C., today, BaaS partner decisions can still have a real impact on a bank’s balance sheet and P&L, as Coastal’s recent earnings miss, driven by fintech partner LendingPoint, demonstrated.

Further, while today’s regulators may be more narrowly focused on financial risks, there’s no telling how decisions made today will be viewed by tomorrow’s regulators. Despite the high-profile failure of Synapse and the impact on its partner banks, reconciliation challenges remain a real threat that banks ignore at their own peril.

Key insight: After years of heightened scrutiny on partner banks, there’s room to move more quickly, but that doesn’t mean every institution is ready to.

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Do Fintechs Need to Partner If They Can Get Their Own Charter?

A major driver of BaaS was the seeming impossibility of fintechs getting their own charters. For 15 or so years, regulators’ appetite for de novo formation slowed to a crawl, and acquisitions of existing banks by fintechs got a very close look.

There simply wasn’t much of an appetite for taking risks that could result in a bank failure. Incumbents, especially the largest banks, were incredibly effective at protecting the competitive moat their charters offered them.

But under current federal regulatory leadership, there’s been 180 degree change, with the “charter window” thrown open. While the agencies haven’t give fintechs carte blanche, the Fed, OCC and FDIC have proven much more willing to entertain charter and deposit insurance applications that would not have been attempted under prior administrations, including Utah and Nevada industrial loan companies, for example.

The OCC in particular has been supportive of stretching the scope of trust bank charters to encompass additional activities and business models.

Still, it’s not anything goes: OCC has rejected charter applications, including for a deposit-taking entity from Dutch digital bank bunq and from cross-border payment firm Wise to form a trust bank.

Key insight: For years, many fintechs didn’t have a viable alternative to partnering with a bank. With charters on the table, the calculus has changed. The appeal of obtaining their own charter may put banks’ most successful programs at risk, as companies like Mercury, Affirm and Upstart pursue their own charters.

The Decline of Middleware in the BaaS Mix

The term “banking-as-a-service” was popularized by a crop of middleware firms that promised to make launching a fintech as easy as setting up a Software-as-a-Service tool. Many of the middleware players created an application programming interface software layer on top of one or multiple partner banks and also took on program-management-like responsibilities, sourcing and onboarding fintech programs on behalf of their bank partners.

While not inherently unworkable, in practice, a lack of alignment on incentives and risks contributed to the rash of bank enforcement actions in the 2020-2024 period. In addition to the bankruptcies of Synapse and Solid, Bond exited to FIS, Apto Payments was acquired by Qenta and Rize sold to Fifth Third, representing significant consolidation in the industry.

Many of the middleware providers that remain active, like Unit and Treasury Prime, have tweaked their approaches to emphasize selling technology to banks instead of serving as program managers. The need for a “direct” relationship between fintech program and bank partner became common wisdom.

Key insight: Many of the problems solved by middleware stemmed from the limitations of core banking systems used by most smaller banks, like the ones provided by FIS, Fiserv and Jack Henry. Rather than rely on a legacy core plus a third-party middleware provider, a newer crop of “BaaS-native” banks built their own systems from the ground up to avoid the complexity and expense of cobbling together multiple third-party systems.

Players like Cross River, Lead and Column represent this “next generation” technology approach to delivering partner banking.

Stablecoins’ Rise Brings Change to the BaaS World

With the passage of the GENIUS Act and the OCC’s willingness to grant national trust bank charters for new kinds of activities and business models, interest in building on stablecoins has been supercharged. (GENIUS stands for “Guiding and Establishing National Innovation for U.S. Stablecoins.”)

Many new entrepreneurs and startups are skipping “tradfi” altogether and opting to build stablecoin-native, global-by-default banking-like products using stablecoins as a foundation. Rightly or wrongly, some perceive stablecoins as “easier” to work with than a traditional bank partner, drawing comparisons from some to how middleware platforms positioned themselves some years ago.

Stablecoins have drawn interest for serving non-U.S. markets, enabling startups to offer remittances / cross-border payments and banking-like products in markets that traditional financial institutions might be unwilling to serve, such as Pakistan, Syria, Bangladesh and Venezuela. Popular stablecoin-based offerings include RedotPay, KAST and Nu Bank’s recently announced Nu Global.

Business insight: Just because a service leverages stablecoins as its foundation doesn’t mean there aren’t opportunities for banks to help them deliver their experiences. Most if not all of these services still need capabilities like on- and off-ramping in fiat currency(e.g., offering vAccounts (virtual accounts) for deposits) and payment card issuing, for example.

BaaS Isn’t Dead, But It is Transforming

There’s no denying that the banking-as-a-service space looks significantly different today than it did in the beginning.

Banks that had been major players in the partnership space, like Blue Ridge, have exited it. Others that experienced compliance issues and were hit with enforcement actions, like Piermont and Thread, have worked through their challenges and doubled down on the business model.

The importance of middleware firms that served as key entry points, both for partner banks and for fintech programs, has decreased, while “BaaS-native” banks like Column, Cross River and Lead have leaned into owning their technology stack as a key differentiator.

The opening of the charter window has, overall, decreased the need for fintechs to use a partner bank. And the rise of stablecoins is changing how at least some services go about building from day one and from the ground up.

Bottom line: This confluence of factors doesn’t mean the opportunity for banks has gone away, but it does mean it looks substantially different than it did even a few short years ago.

Does this mean BaaS is a potential opportunity for your institution, at this stage? Ask the following questions to help determine that:

• What type of BaaS activities are the right fit for your institution (deposits, lending, card issuing/BIN sponsorship, payment processing, etc.)?

• How would a BaaS business unit align with and support your bank’s wider strategy?

• Is the bank able and willing to make the necessary investments in technology, staff and business development to build out a BaaS program?

• What are your alternative strategic options vs. pursuing a BaaS program?

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