Why Embedded Finance Didn’t Work

If you were building a fintech app five years ago, your options were…painful.

You either had to:

Either way, slow, messy, expensive.

Solid was built to change that. Founded in 2019 by Arjun Thyagarajan and Suresh Venkatraman, Solid’s goal was deceptively simple: Embed a full-stack banking experience inside any product — cleanly, compliantly, and quickly.

You didn’t have to rethink your product.

You didn’t have to hire a compliance team.

You didn’t have to negotiate with banks.

Just one API call — and your product could launch bank accounts, issue cards, move money, and stay compliant.

The magic trick?

Solid didn’t just resell banking features — it vertically integrated key parts of the stack: ledgering, compliance, KYC/KYB, and payment rails.

Their internal rallying cry was closer to “Stripe for banking” than just BaaS.

And for a while, the timing was perfect:

Solid raised $80.7 million across multiple rounds, including a $63 million Series B in 2022 led by FTV Capital, with participation from Headline, Base10 Partners, and others. The company’s valuation during that round was estimated at $300 million, signaling strong investor confidence.

They built a modular, white-labeled, developer-first banking platform — perfect for SaaS companies, marketplaces, and fintech apps who wanted to launch financial features fast, without becoming banks themselves.

But, like many fast-moving startups, Solid’s journey hit a rough patch. Despite its explosive growth, including $2 billion in transaction volume and a 10x revenue increase in 2022, the company filed for bankruptcy, raising questions about what went wrong. Let’s break it down.

Solid was a classic infrastructure bet: abstract complex banking primitives (accounts, payments, cards, compliance) behind a single API platform.

Initially, the strategy was clear:

This was a rational bet against two macro trends:

Solid’s core insight was correct.But the operational and financial execution proved fatal at scale.

Between 2020 and 2022, the fintech world was all about becoming the “Stripe for X” or the “AWS for Y.” Embedded finance was the new frontier: SaaS platforms transforming into fintechs overnight.

The pitch was clear:

“Why build your own infrastructure when you can plug into ours and launch banking, cards, lending in a sprint?”

But what was sold as plug-and-play quickly became risk-and-pray. Solid, in particular, made it too easy for underqualified clients to launch products with real regulatory and financial consequences.

At scale, this creates systemic fragility:

Embedding finance doesn’t abstract the risk. It externalizes it. And as volume rises, so does the blast radius.

The ZIRP (Zero Interest Rate Policy) era was generous to startups like Solid:

But after 2022, investors aren’t just looking at top-line growth anymore. They demand audited books, retention curves, legal clarity, and proof of operational resilience.

FTV, Solid’s lead investor, didn’t just stop investing—they sued the company. That’s how stark the shift was. Trust evaporated, LP (Limited Partner) pressure mounted, and venture capital pivoted from growth-at-all-costs to truth-at-all-costs.

The market stopped rewarding ambition and started rewarding accuracy.

A core issue for Solid was around revenue recognition. The company was allegedly recognizing revenue from customers who:

This signals a deeper misalignment: the sales team’s push to “sign logos fast” far outpaced the product’s true ability to deliver value—specifically, to drive live transaction volume.

In embedded finance, transactional throughput (ACH volume, card swipes, ledger movements) is the true economic engine. Signed contracts ≠ business health. Active transaction flows = business health.

This misalignment led to a host of problems:

Ultimately, Solid’s real business activity was disconnected from the numbers presented to investors. This wasn’t just a legal issue—it was a business model collapse.

With $11B+ of processed transaction volume and 150M+ API calls, Solid appeared operationally robust. But volume alone isn’t the metric that matters in embedded finance.

What actually matters:

Solid scaled its “gross volume” (a vanity metric) without demonstrating the corresponding net economics. This mirrors the “unit economics blind spots” that ultimately took down other BaaS (Banking-as-a-Service) players like Synapse, Railsbank, and others.

From 2018 to 2021, fintech infrastructure was a "growth at all costs" market. By 2022, the market shifted—embedded finance became a “compliance, risk, and margin” market.

Solid didn’t adjust its internal systems, revenue operations, or customer onboarding rigor quickly enough to match this new environment. Compliance wasn’t a moat—it became an existential risk.

In markets where regulatory overhead compounds exponentially over time, early shortcuts eventually create structural liabilities.

Solid’s bankruptcy is one domino in a chain:

Across the board:

This represents a macro deceleration of the embedded finance dream.

Like many BaaS startups, Solid relied heavily on Evolve Bank as its banking partner. Evolve also worked with Synapse (which filed for Chapter 11) and Mercury (which later severed ties with Evolve). There’s clear risk concentration in the ecosystem—and Solid got caught in the crossfire.

If Evolve pulled support or tightened controls post-Synapse, it would have immediate downstream impacts on Solid’s operations—especially given how heavily Solid’s full-stack offering depended on sponsor bank rails.

In a BaaS model, control over your bank partners is critical across:

Solid outsourced key compliance functions to its partners but retained all the commercial and reputational exposure. When bank partners move slowly or inconsistently, the platform’s customer experience, compliance posture, and unit economics degrade sharply.

Solid, like many BaaS players, built a high-dependency, low-control system at the infrastructure layer—a structurally unstable model under regulatory scrutiny.

Solid hadn’t raised new capital since August 2022, when it announced a $63M Series B at a $330M valuation. It claimed 10x revenue growth and a doubled customer base (to 100+ clients) during that cycle.

But between the funding climate shift in late 2022 and tightening fintech margins, Solid became a victim of a brutal capital environment. It couldn’t raise additional funds and ran out of room to maneuver.

Solid was structured like a high-burn growth startup in a capital-intensive, ops-heavy category. Without the next round of funding, default-alive wasn’t an option. The company didn’t adapt its business model or cost structure as the funding environment changed, continuing to operate as if capital would always be available.

In 2023, FTV Capital sued Solid, accusing the company of:

FTV demanded the return of its investment and called for the founders to resign. The founders countersued, accusing FTV of making “made-up claims of fraud.”

This wasn’t just a standard cap table conflict. It was a public, messy, and catastrophic breakdown of trust, leading to reputational harm, distraction, and further capital constraints.

Solid’s core value proposition was “compliance-as-a-service,” offering KYC, AML, ledgering, and risk monitoring so clients could go to market quickly. But that positioned Solid as a key player in:

With over 100 clients, some of them early-stage, Solid exposed itself to:

It’s unclear if this triggered Evolve’s withdrawal or played into investor concerns, but given how few companies operate this model successfully (e.g., Synapse, Railsr), it’s likely that it did.

Court filings revealed that Solid had $760K in unsecured trade debt. Creditors included AWS, Visa, Plaid, Trulioo, law firms, and regulatory consultants.

Some of these creditors, like FS Vector, are core fintech compliance shops, suggesting Solid wasn’t keeping up with regulatory advisory costs or basic operations.