Embedded Finance Decision Tree
Which program model fits your platform? Walk through the key decision points — volume, product requirements, compliance capacity, and economics needs — to identify the right architecture before you select a vendor.
Q1: What is your current (or projected 12-month) monthly payment processing volume?
The economics argument for a direct bank relationship is not yet compelling. The operational overhead exceeds the benefit. → Continue to Q2
The annual economics gap between BaaS and direct is likely $300K–$1.5M+. A direct relationship is worth serious evaluation. → Skip to Q4
Q2: Do you need card issuing, disbursements, or float economics in your program?
You need BaaS or a direct bank. Pure processor relationships won't cover these. → Continue to Q3
PayFac or Processor
You need a payment processor — Stripe, a PayFac arrangement, or a direct processor relationship. BaaS infrastructure is more than you need at this stage. Start with interchange-plus pricing, not flat rate.
Q3: Do you have an internal BSA/AML compliance program and a dedicated compliance operator?
BaaS — with migration plan
BaaS is the right starting point. You can launch in 60–120 days. Design the migration trigger now — the volume or product requirement at which you move to a direct bank relationship — before you're locked in.
BaaS — compliance build required
You need BaaS and you need to build the compliance program before your sponsor bank onboarding conversation. Most banks require a written, board-approved BSA/AML program before approving your program.
Q4: Do you currently have a BaaS relationship? If so, what is your annual economics gap?
The migration from BaaS to direct is your highest-ROI project. → Continue to Q5
Direct Sponsor Bank
At $3M+ projected volume, building directly on a sponsor bank relationship is the correct architecture. The 6–12 month bank onboarding timeline is worth it — you avoid BaaS economics from day one.
Q5: Was your BaaS integration designed with a migration abstraction layer?
Direct Bank — 6–9 month migration
You have a clean migration path. Start sponsor bank conversations now — the onboarding takes 6–12 months and can run in parallel with your BaaS program. Build the compliance infrastructure first.
Direct Bank — 12–18 month migration
Migration is still worth it at your economics gap — but it requires re-architecture. Start the compliance program and bank conversations while building the abstraction layer. Plan for 12–18 months total.
Every program has context the tree can't capture — customer segment risk, product requirements, bank appetite, and existing contract terms. The tree identifies the likely direction. The architecture conversation determines the specific path.