Fintechs Unbundle BaaS for Margins
Former Galileo executive on differentiation and scalability in the BaaS market
Going direct to an issuer processor is mainly a margin decision. The fintech still gets card issuing rails and bank access, but it removes one extra platform from the interchange stack. Instead of paying a BaaS layer to bundle bank sourcing, compliance workflows, and program management, the fintech can negotiate directly with a sponsor bank, keep more of the interchange, and control which bank fits its product and economics best.
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In the standard card economics outlined here, the fintech already takes the largest share of interchange. The BaaS layer and bank share the remainder with the network and processor. Removing the bundled BaaS layer lets more of that pool stay with the fintech, especially once volume gives it leverage in bank negotiations.
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The tradeoff is operational ownership. All-in-one BaaS platforms package bank relationships, KYC, compliance processes, and support, often using processors like i2c, Marqeta, or Visa DPS underneath. Going direct means the fintech has to manage more of the bank relationship itself, rather than outsourcing that coordination.
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This is why larger fintechs often unbundle over time. As volume grows, fees compress toward the top of the stack, and direct control over the sponsor bank becomes strategically valuable. It improves interchange passthrough, reduces dependence on a middleware platform, and gives the fintech more say over roadmap, pricing, and risk operations.
The market is moving toward a split where smaller teams buy the full stack for speed, while scaled fintechs peel layers away to reclaim economics and control. That leaves issuer processors as core infrastructure, and pushes all-in-one BaaS platforms to win on faster launch, better tooling, and better bank orchestration rather than on access alone.