Solid, a firm specializing in Backend-as-a-Service (BaaS), submits a petition for bankruptcy.
In the dynamic world of banking and technology, the recent bankruptcy of Solid Financial Technologies serves as a stark reminder of the operational, regulatory, and reputational risks associated with bank-fintech collaborations.
Solid, once hailed as the "AWS of fintech" by its co-founders Arjun Thyagarajan and Raghav Lal, has faced a tumultuous journey. The company, which has raised approximately $81 million in venture capital funding, has had to navigate significant and costly litigation, including a lawsuit from investor FTV Capital.
The FTV litigation, which was dismissed under a settlement, saw FTV claiming that Solid's co-founders deceived them regarding Solid's "revenues, customer churn, and business generally." This allegation hampered Solid's relationship with its partner bank, Lewis & Clark Bank, leading to the termination of their master services agreement last August.
Solid's bankruptcy comes after its partnership with Evolve Bank & Trust, which was also Synapse's bank partner and has faced enforcement actions and lawsuits since Synapse's collapse. Synapse, a middleware fintech provider, filed for bankruptcy in April 2024, with roughly $85 million in customer funds missing.
As of the bankruptcy filing date, Solid has roughly $760,000 in unsecured trade debt and roughly $7 million in cash on hand, of which roughly $2 million is held in nonliquid reserve accounts. Solid aims to cut down legal expenditures, sell its valuable assets - its application programming interface - and create a Chapter 11 plan after a sale process.
The bank-fintech partnership space has come under heightened scrutiny due to incidents like Synapse's bankruptcy. The space must address critical issues such as lack of transparency, inadequate oversight, and the difficulties banks face in effectively managing fintech collaborations within regulatory frameworks.
Successful partnerships require structured governance frameworks incorporating operational oversight, financial review, and regular strategic reassessment. Banks must have near real-time visibility into fintech partners’ activities to monitor risks and ensure compliance. Despite some easing of fintech regulatory scrutiny in 2025, about 45% of companies offering banking-as-a-service (BaaS) through banks face formal enforcement action, illustrating persistent regulatory concerns.
Many bank-fintech partnerships do not meet performance expectations, with studies indicating that around two-thirds fall short. Challenges often stem from unclear roles, lack of aligned incentives, and poor governance structures, which impede sustainable value creation and risk mitigation.
Reputation and fraud risk also remain significant, especially when fintech partnerships involve complex operational or custodial functions. Allegations against financial entities like Evolve Bank & Trust highlight that such risks can damage bank reputations and invite regulatory sanctions if not properly managed.
Banks must navigate a delicate balance: engaging fintechs to stay digitally relevant and capture fee income, while avoiding overextension into partnerships they cannot control. The fallout from bankruptcies and fraud cases pushes banks to adopt more cautious, risk-aware approaches that emphasize transparency, control, and regulator readiness.
Solid Financial Technologies, in its restructuring process, plans to maintain normal business operations. The company currently has three staff members and one independent contractor, compared to 23 employees in 2023. Solid's wholly-owned subsidiary, Solid India, is being wound down and expected to cease operations by May 31.
In sum, the experiences of Solid Financial Technologies, Synapse, and Evolve Bank & Trust illustrate that bank-fintech partnerships are promising but fraught with operational, regulatory, and reputational risks. Banks must strengthen governance, enhance real-time transparency, carefully manage risk, and structure partnerships with clear roles and aligned incentives to realize benefits sustainably.
Business partners must be mindful of investing in fintech companies that do not have robust governance structures, as operational risks, regulatory issues, and reputational damage can arise, as evident in the case of Solid Financial Technologies. To navigate these risks, banks should develop precise partnership agreements that clearly define roles, align incentives, and prioritize near real-time transparency.
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