Struggling BaaS company, Solid, submits for bankruptcy protection
Solid Financial Technologies Files for Bankruptcy, Highlighting Challenges in Bank-Fintech Partnerships
Solid Financial Technologies, a fintech company offering modern infrastructure to help businesses become fintech companies, filed for Chapter 11 bankruptcy protection and restructuring in a Delaware court last week. The move comes amidst a series of regulatory challenges and legal disputes that have put the spotlight on the bank-fintech partnership space.
The company's CEO, Arjun Thyagarajan, described Solid as a pioneer in the fintech industry. However, the recent year has been fraught with difficulties. Solid has not signed any new client contracts in 2025 and has experienced significant client departures in late 2023 and early 2024.
Solid's relationship with its partner bank, Lewis & Clark Bank, was strained by litigation, resulting in additional reporting requirements and a $10 million security reserve. The litigation was with FTV Capital, who claimed that Solid's co-founders, Thyagarajan and Raghav Lal, deceived them regarding Solid's revenues, customer churn, and business generally. The lawsuit was later dismissed under a settlement.
Solid has raised roughly $81 million in venture capital over three funding rounds. Despite this, the company finds itself in a challenging financial position. 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.
In response to these challenges, Solid decided to pursue Subchapter V of Chapter 11. This route offers shorter deadlines, greater flexibility, and reduced U.S. trustee fees. 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 bankruptcy of Solid, along with Synapse earlier this year, has heightened regulatory scrutiny on bank-fintech partnerships. Banks are challenged to balance digital innovation with prudent risk management. The regulatory landscape demands greater transparency, stronger compliance controls, and strategic partnership governance to mitigate the risks inherent in these evolving collaborations.
The rise of payment stablecoins and fintech innovation is expanding regulatory demands. Fintechs acting as stablecoin issuers now face comprehensive licensing and supervisory scrutiny, sometimes exceeding traditional banking oversight, necessitating robust compliance and risk frameworks for banks involved in these partnerships.
Solid has worked with 142 clients since its founding, including BBVA, Evolve, Citizens Bank of Weir, and Lewis & Clark Bank. The company's wholly-owned subsidiary, Solid India, is being wound down, with operations expected to cease by May 31. Solid currently has only four employees and one independent contractor, compared to 23 employees in 2023.
The bank-fintech partnership space has come under heightened scrutiny since Synapse's bankruptcy, where roughly $85 million in customer funds were reported missing. The bankruptcy of fintechs like Solid and Synapse underscores the dangers of over-extension without strong controls or clear role definitions between banks and fintech partners.
As Solid navigates through its restructuring process, the company aims to maintain normal business operations. The future of fintech-bank partnerships will likely depend on their ability to navigate the complex regulatory landscape and manage operational risks effectively.
[1] "Bank-Fintech Partnerships: Navigating Regulatory Scrutiny and Operational Risk Management" - Fintech News, May 2025 [2] "The False Binary of Bank-Fintech Partnerships" - Fintech News, May 2025 [3] "Regulatory Skepticism and Evolving Supervision in Bank-Fintech Partnerships" - Fintech News, May 2025 [4] "Expanding Regulatory Demands in the Bank-Fintech Partnership Space" - Fintech News, May 2025
Businesses seeking to invest in the fintech sector may want to carefully consider the challenges highlighted by Solid Financial Technologies' bankruptcy. The company's financial difficulties, compounded by legal disputes and regulatory challenges, underscore the need for prudent risk management and strong compliance controls in fintech-bank partnerships.
Solid's bankruptcy filing and subsequent restructuring process serve as a cautionary tale for both fintech companies and their partner banks, emphasizing the importance of navigating the complex regulatory landscape and managing operational risks effectively to ensure partnership success.
