Building a Sustainable BaaS Brand: Lessons from the Market Players
𝗕𝗮𝗻𝗸𝗶𝗻𝗴-𝗮𝘀-𝗮-𝗦𝗲𝗿𝘃𝗶𝗰𝗲 (BaaS) has reshaped how fintechs and non-financial platforms offer financial products to end-users. Among the pioneers of this model in Europe was the Berlin-based Solaris SE, a company that promised to revolutionize embedded finance with a modular, API-first approach. For a while, it became the household name for BaaS, enabling new banking service providers and retailers to offer financial services seamlessly. But recent regulatory actions reveal the cracks beneath the surface and offer a cautionary tale for the next generation of BaaS providers.
The Latest Solaris Setback: BaFin’s €500,000 Fine
In June 2025, Germany’s financial regulator BaFin fined Solaris SE €500,000 for repeatedly exceeding the large exposure limits set by the European Capital Requirements Regulation (CRR) between January 2022 and March 2024. These rules are not just formalities; they’re designed to protect the financial system from concentrated risk that could threaten a bank’s solvency.
Under CRR rules, banks must avoid excessive exposure to single counterparties or groups of connected clients. Such significant exposures, if not properly managed, can threaten an institution’s solvency in the event of default, thereby undermining financial stability.
This is not Solaris' first regulatory misstep. In fact, BaFin has consistently flagged the firm’s compliance deficiencies, governance issues, and partner oversight weaknesses over the last few years. Once considered a poster child for European fintech innovation, Solaris is now a case study in how rapid scaling without operational maturity can backfire.
Solaris Flashback: How Solaris Captured the BaaS Opportunity
Founded in 2015 under the Finleap incubator and formally launched in early 2016, Solaris entered the scene at the perfect time. The rise of fintech apps, digital wallets, and alternative lenders created a demand for plug-and-play banking infrastructure. Solaris offered exactly that, modular services ranging from IBAN generation to KYC, cards, and digital lending.
Highlights of its ascent include:
· Massive funding rounds, from a €26 million Series A in 2017 to a €60 million Series C in 2020. Backers included HV Capital, Visa, BBVA, SBI, Arvato, Samsung, ABN AMRO, and Lakestar.
· Strategic partnerships with Mastercard and Visa, enabling Swift-scale card issuance and embedded finance services.
· Geographic expansion, setting up branches across Europe, including London, Paris, Milan, Madrid, and Vilnius.
· The launch of marquee deals, such as the 10-year credit card partnership with ADAC, Germany’s auto association, which was expected to generate over €100 million annually.
With a vision of a “banking tech company built for the future,” Solaris epitomized the BaaS promise: platform-driven, partner-first, growth-centric.
Its early partnerships with buzzy startups and neobanks fueled fast growth. Solaris marketed itself as a “tech company with a banking license”, attracting VC capital and expanding its footprint across Europe.
But this growth-first narrative came at a cost.
BaaS Challenges: When Growth Outpaces Governance
Solaris’ problems weren’t due to a failed product-market fit, but rather operational fragility. Over time, the platform’s internal controls, risk management frameworks, and partner due diligence processes failed to keep pace with its ambitions.
Amid rapid accomplishments, Solaris overlooked critical underpinnings: compliance, risk control, and partner oversight. Regulators quickly took note:
Special Audit: BaFin launched a special audit after uncovering serious organizational deficiencies in earlier supervisory reviews.
New limits imposed: As of early 2023, Solaris was prohibited from onboarding new corporate clients without prior approval from BaFin.
AML breakdowns: In March 2024, BaFin fined Solaris a record €6.5 million for systematically filing late Suspicious Transaction Reports (STRs) related to money laundering.
Monitoring escalation: A special BaFin monitor, appointed in 2022, had their mandate extended in July 2024 due to persistent unresolved issues.
Further penalties: Between January 2022 and March 2024, Solaris also breached large exposure limits under the EU CRR, resulting in fines totaling €500,000.
Meanwhile, the company reported mounting losses (€56 million in 2022 and €178 million in 2023, according to the open source data). Its surface-level financial health masked deeper fragilities.
All in all, the key failures of Solaris included:
Compliance gaps grew unchecked. Partner KYC/AML processes were inadequate; automated monitoring was weak, resulting in significant reporting delays that triggered heavy fines.
Risk concentration became an issue. Solaris exceeded its CRR large-exposure limits due to its reliance on a few major counterparties, even as revenue ballooned from marquee clients like ADAC.
Organizational fatigue set in. Despite leadership reshuffles and cutbacks, internal chaos persisted, as evidenced by recurring regulator warnings.
Strategic erosion: Solaris began offboarding clients in 2024, spun off parts of its EMI operations (Contis), and cut costs by laying off staff, reductions made to preserve capital amid investor fatigue.
Funding pressure: Although it raised roughly €38 million in mid-2023 and launched a €96 million Series F in early 2024, further funding struggles were reported as the company struggled to meet obligations tied to key deals.
While the company scrambled to fix issues and pivot to new leadership, regulators lost patience and eventually confidence.
What Can We Learn? 5 Pillars for Building a Sustainable BaaS Brand
The Solaris story isn’t just about one company; it’s a signal for the entire embedded finance sector. Here’s what emerging BaaS providers and platforms must prioritize:
· Compliance by Design: BaaS is not a tech-only solution. Regulatory compliance must be baked into the architecture, not retrofitted later. That means scalable risk engines, real-time monitoring, and clear partner risk tiers.
· Partner Governance Matters: You’re only as strong as your weakest client. Implement strict onboarding due diligence, enforce transactional controls, and continuously monitor clients, not just during the sales process.
· Transparency with Regulators: Proactive communication with supervisors isn’t optional. Regulatory trust can be a competitive moat, and transparency builds credibility.
· Capital and Risk Diversification: Avoid relying on a few high-volume clients. A sustainable BaaS model requires diversified income streams, well-managed capital buffers, and clear stress-testing scenarios to ensure resilience.
· Operational Maturity Over Speed: Speed to market is tempting, but building a resilient core is more important. This includes not only technology but also exemplary leadership, compliance expertise, and cross-functional alignment.
The result: a once-promising fintech stalwart now operating under surveillance, with dwindling investor confidence and a tarnished reputation.
BaaS providers should never forget that they are banks first, and tech companies second.
The Future of Embedded Finance Depends on Trust
The embedded finance revolution is far from over, but trust is now the true currency of the digital age. Regulators are watching. Consumers are becoming savvier. And enterprise clients won’t tolerate reputational risk from unstable infrastructure partners.
If BaaS platforms wish to survive “the next wave,” they must internalize that:
· Tech without prudence fails,
· Partnerships require backbone,
· And innovation demands risk resilience.
For those willing to make the hard choices early, investing in compliance, governance, and capital strength, the embedded finance horizon remains richer than ever. Solar’s decline isn’t the end of the story; it’s a lesson in building brands that last.
Solaris may yet rebound, but its journey serves as a powerful reminder:
Building a tech-first bank is easy. Building a sustainable, trusted BaaS brand is not.
Contextual Solutions is a Berlin-based strategy, expansion, and product consultancy with expertise in FinTech, LegalTech, Payments, BaaS, HRTech, Gaming, RegTech, AdTech, e-commerce, and so much more!
As a Strategic Tech Consultancy, we facilitate the necessary research and advise our clients on their business model, case, product-market fit, business development, and market entry strategies.
Contact us via info@contextuals.de to request a complimentary exploration call to discuss ideal tech partners and learn more about our BaaS expertise and best practices.
