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Banking as a Service: State of play

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Mar 11, 2024
Global funding in Banking as a Service companies
Data: Pitchbook; Chart: Axios Visuals

Last updated March 12, 2024

Banking as a Service provider Synctera raised an $18.6 million Series A extension in March, even as other players in the BaaS market struggle with layoffs and acquisitions.

Why it matters: Once a popular sector of the fintech industry, BaaS companies are seeing increased consolidation and a shrinking workforce.

What's happening: The sector's struggles have been spurred by a global pullback in funding, a changing customer base and increased regulatory pressure.

Activity that highlight the problems facing the sector from the last 12 months includes:

  • It was made public in the beginning of 2024 that Blue Ridge Bank, Choice Bank and Lineage Bank were all hit with consent orders or enforcement actions related to their BaaS programs.
  • Synapse has faced three major hits: it laid off staff in October; its banking partner Evolve Bank kicked Synapse off in October; and it was sued by one of its largest clients, Mercury, in December.
  • Solid (also an Evolve partner) was sued in October by its Series B investor FTV Capital.
  • Treasury Prime, which raised $40 million last winter, laid off staff in February as it pivots away from selling to fintechs and focuses instead on solely offering its middleware to banks who would directly manage their own fintech partnerships.

Meanwhile, there have been some deals closed.

  • U.K. BaaS bank Griffin raised £19 million for a Series A extension and obtained a banking license from local financial services regulators in March.
  • In June, Fidelity National Information Services (NYSE: FIS) confirmed it had acquired BaaS startup Bond.
  • Visa agreed to buy Pismo for $1 billion in cash in June. Pismo was valued around $400m in its last 2021 funding round.
  • Fifth Third Bancorp's (NASDAQ: FITB) acquired the embedded payments platform Rize Money in May.

The bottom line: While funding in the BaaS ecosystem has dropped over recent years, the market is estimated to reach $150 billion within the next five years, according to analysis by BCG and Finda, as the trend of "finance in everyday life" permeates consumer services like logistics, travel and e-commerce.

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