Opening Address: Should Every Bank Launch BaaS?
Lars Markull — Embedded Finance Review
Embedded banking as a service (BaaS) demands strategic decisions about future infrastructure, business models, and market relevance, beyond mere product launches. BaaS varies widely, requiring banks to assess their identity, risk tolerance, technology readiness, and regulatory environment to determine roles—from full-stack providers to risk-averse observers. Success hinges not only on technology and compliance but significantly on go-to-market capabilities and differentiation amid fintech competitors. Poorly executed BaaS risks severe reputational harm, so many banks should cautiously evaluate their potential and revisit strategies regularly.
"Yes to banking as a service is not just about launching a product; it's a decision about the future of your infrastructure, business model, and relevance."
Summary
- Banking as a service (BaaS) impacts a bank's future infrastructure, business model, and relevance, not just product launch decisions. - BaaS varies widely; banks must carefully assess their identity, goals, and market position before deciding to launch it. - Banks can play different BaaS roles: full-stack providers, sponsor banks partnering on tech, selective risk-tolerant providers, or remain observers. - Success in BaaS requires focus beyond tech and compliance, emphasizing distribution, market differentiation, and culture adaptation. - Poorly executed BaaS can harm reputation; most banks shouldn't rush to full-fledged BaaS but should thoroughly evaluate their position regularly.
Article
Banking as a service: strategic imperative or dangerous distraction?
Expert warns banks against hasty BaaS adoption at Nordic Fintech Summit
At the opening of the Nordic Fintech Summit in May 2025, fintech infrastructure specialist Lars Markull delivered a nuanced analysis of banking as a service (BaaS), cautioning financial institutions against rushing into the space without proper strategic assessment.
"Banking as a service is not one size fits all; you must look in the mirror and answer who you are, where you're coming from, and what you want to achieve," Markull told the audience of banking executives and fintech leaders gathered at the two-day event.
Beyond the hype: fundamental questions for financial institutions
The fintech advisor, who founded Embedded Finance Review after a decade building infrastructure businesses, emphasized that BaaS represents far more than a simple product decision. "Saying yes to banking as a service is not just about launching a product. It's a decision about the future of your infrastructure, business model, and relevance," he explained.
Markull outlined how banks must conduct thorough self-assessment before determining their BaaS strategy, arguing that many institutions "jump too quickly" without the necessary groundwork. This includes understanding regulatory frameworks, technical capabilities, and risk tolerance – all of which vary significantly across markets and organizations.
Four potential roles in the BaaS ecosystem
According to Markull's analysis, banks can occupy four distinct positions in the BaaS landscape:
"There are roughly four different roles a bank can play in banking as a service," he noted, "from full-stack providers to selective, opportunistic participants."
The most ambitious approach – becoming a full-stack provider offering comprehensive technology and regulatory support directly to fintechs and brands – is viable for only "a handful" of banks in each country, according to Markull.
Alternatively, institutions can act as sponsor banks (handling compliance while partnering on technology), selective providers (pursuing targeted opportunities), or simply remain observers if they lack the necessary capabilities or risk appetite.
Distribution: the overlooked challenge
While many banks focus heavily on technical integration and regulatory compliance when considering BaaS, Markull highlighted that distribution and go-to-market strategy often present the greatest hurdles.
"Financial institutions often underestimate the effort required in distribution, go-to-market strategies, and differentiation from existing providers," he warned, noting that banks entering the space face competition not only from peers but also established fintech infrastructure players.
The cultural shift required when serving fintech clients represents another frequently overlooked challenge. "Many institutions focus on tech, risk, and compliance—only to be caught by surprise when dealing with client acquisition and market launch," Markull observed.
Cautionary tales of poor execution
Perhaps Markull's starkest warning concerned the dangers of implementing BaaS solutions without adequate preparation. "Doing banking as a service poorly is worse than not doing it at all; rushing without preparation can cause massive impact and customer trust issues," he cautioned.
He cited several examples of BaaS initiatives that encountered significant problems, including high-profile cases involving Synapse with Evolve Bank in the US, and European providers Railsr and Solaris. Such failures, particularly when they affect customer access to funds, can severely damage institutional reputations.
Realistic assessment over universal adoption
Concluding his address, Markull rejected the notion that every bank should launch comprehensive BaaS offerings, instead advocating for thoughtful evaluation of capabilities and strategic fit.
"Most banks don't need a full-fledged Banking as a Service platform today, but every bank should invest time in understanding their role and market," he stated, emphasizing that the embedded finance competitive landscape is "broad and evolving."
For those institutions that do proceed with BaaS initiatives, Markull recommended frequent strategic reassessment – at minimum every six months – to adapt to the rapidly changing market dynamics.
As the financial services industry continues exploring embedded finance opportunities, Markull's measured analysis offered a valuable counterpoint to the prevailing excitement surrounding BaaS, reminding attendees that strategic consideration must precede implementation – particularly when customer trust and institutional reputation hang in the balance.
Part of Nordic Fintech Summit