Banking-as-a-ServiceBaaS
Banking-as-a-service (BaaS) is an arrangement in which a chartered bank, called the sponsor or partner bank, lets a non-bank company offer deposit accounts, cards or loans under its own brand. The bank holds the deposits or originates the loans and remains responsible to its regulators for the program.
How BaaS works
The fintech owns the app, the brand and the customer relationship. The sponsor bank holds the charter: deposits sit at the bank, usually in pooled accounts eligible for pass-through FDIC insurance, and loans are originated on the bank’s books before many are sold back to the fintech or investors. Some programs add a middleware company between the two that handles ledgers and connections. The bank earns fees and deposits; the fintech gets to market without a charter.
Many of the best-known consumer fintechs run this way. Affirm works with Celtic Bank and Lead Bank, Upgrade with Cross River and Celtic, Flex with Lead Bank and Column, and Mission Lane with TAB Bank and WebBank.
The regulatory crackdown
The model drew heavy scrutiny after 2022. Federal regulators issued final interagency guidance on third-party risk management in June 2023, and several sponsor banks entered enforcement actions over BSA/AML, consumer compliance and oversight of fintech partners, including Cross River (FDIC, 2023) and Evolve Bank & Trust (Federal Reserve, 2024).
The April 2024 bankruptcy of middleware provider Synapse showed the risk to consumers: when the ledger between fintech apps and their partner banks broke down, end users lost access to funds for months. Pass-through deposit insurance only protects a customer if the bank or its agents keep records that show who owns each dollar.
From renting a bank to becoming one
Higher compliance costs at sponsor banks, and a friendlier charter environment, have pushed fintechs toward charters of their own. As of October 2026, at least 14 of the 27 pending FDIC deposit insurance applications came from fintechs and consumer lenders. Mission Lane, for example, plans to move its card program to its own bank over three years. For a community bank with a sponsor business, that is fee income and deposits that can leave when the partner gets a charter.
Common questions
What is a sponsor bank?
The chartered, FDIC-insured bank behind a fintech’s accounts, cards or loans. It holds the deposits or originates the loans and answers to regulators for the program’s compliance.
Is money in a fintech app FDIC insured?
Only the portion held at an insured bank, and only if the records show which customer owns which funds. FDIC insurance does not cover the failure of the fintech or a middleware provider, which is what the Synapse bankruptcy exposed.
Why are fintechs applying for their own charters?
A charter lets them fund loans with their own insured deposits and keep the economics they share with a partner bank. Regulators have also been approving more charters since 2025.