Fintech and BIN Sponsor: What Is the Difference between a Technology Provider and a Regulated Entity?
- Sparados
- Jan 22
- 5 min read
With the dynamic development of fintech, financial products are increasingly appearing on the market that, from the end user's perspective, resemble traditional banking services: payment cards, accounts, digital wallets, and embedded finance solutions. At the same time, many companies offering these products is not a bank or payment institution.
This raises questions — especially during times of regulatory tension or media crises— about who is actually responsible for licensing, security of funds, and legal compliance . Key to understanding this structure are the Banking as a Service (BaaS) and BIN Sponsoring models.
What is Partnership Cooperation in the BaaS Model?
Banking as a Service (BaaS) is a collaboration model in which a regulated entity and a fintech combine their competencies rather than duplicate roles. It is currently one of the cornerstones of financial innovation in Europe.
In this model, a bank, electronic money institution (EMI) or national payment institution (KIP) provides:
a payment license,
regulatory infrastructure,
billing and reporting systems,
relationship with the regulator.
In turn, the fintech partner is responsible for:
creating a product,
system technology and architecture,
user experience (UX),
sales channels and marketing,
business development.
This is a conscious division of roles that allows financial innovations to be introduced to the market faster and more safely.
Division of roles in the BaaS model
Element | Regulated entity | Fintech partner |
License | ✅ has | ❌ does not have |
Relationship with the regulator | ✅ direct | ❌ intermediate |
KYC / AML / Compliance | ✅ responsibility | ⚠️ operational support |
Technology / UX | ⚠️ infrastructure | ✅ product and front |
Marketing and sales | ❌ | ✅ |
Fintech operates "under the regulatory umbrella" of a licensed entity, but is not itself a licensed entity. This is a crucial distinction often overlooked in simplistic media narratives.
What is BIN Sponsorship and Why is It Important?
BIN Sponsoring is a specialized form of BaaS focused on issuing payment cards using Visa and Mastercard schemes. It's the fastest way for a fintech to offer a physical or virtual card to its users.
What is BIN?
The BIN ( Bank Identification Number ) is the first 6–8 digits of a payment card number. This number informs payment systems around the world who owns the card and who guarantees transaction settlement. The BIN is assigned exclusively to the institution that is a member (Principal Member) of the card organization.
How does BIN Sponsoring work in practice?
In this model:
BIN sponsor (bank or EMI):
provides BIN,
is the formal issuer of the card,
responsible for regulatory compliance,
reports to the Polish Financial Supervision Authority or the EBA,
is liable to Visa and Mastercard.
Fintech – technology partner :
designs a card program,
builds the application and the technological layer,
acquires and serves customers,
often provides first-line user support.
Even if the card is fully "fintech" visually and product-wise, regulatory compliance always belongs to the BIN sponsor.
Why are BaaS and BIN Sponsoring Models the Market Standard?
Business perspective
For fintechs, the following are key:
speed of entry into the market (6–12 months instead of several years),
no need to incur huge licensing costs,
the ability to test and scale products internationally.
Regulatory perspective
From the regulator's point of view:
not every innovator has to be a bank,
partnership model:
is accepted by the Polish Financial Supervision Authority,
remains compliant with PSD2 and EMD2,
functions as a standard in the EU.
This is not a circumvention of regulations, but their practical, market application.
Division of Responsibility – a Key Element in Crises
In crisis situations (e.g. decisions by the regulator regarding one of the entities), a precise division of responsibilities is crucial .
What is the BIN sponsor / BaaS provider responsible for?
maintaining licenses,
compliance and reporting,
relationship with the regulator,
security of customer funds.
What is fintech responsible for?
product and technology,
user experience,
communication with customers,
provision of services in accordance with the partnership agreement.
Sponsor regulatory issues do not equate to fintech violations , although they may require operational and communication actions.
Main Risk Categories in the BaaS and BIN Sponsoring Models
While regulatory outsourcing brings enormous business benefits, it also introduces specific categories of risks that must be included in the business continuity management strategy of any mature fintech.
1. Regulatory risk: When the umbrella no longer protects
Regulatory risk is the most sensitive area of cooperation. It stems directly from the relationship between the sponsor (bank, EMI, or KIP) and a supervisory authority, such as the Polish Financial Supervision Authority (KNF) or the European Banking Authority (EBA).
If violations are found – for example in the area of anti-money laundering (AML) or identity verification (KYC) procedures – the regulator may impose severe sanctions on the sponsor: from a ban on onboarding new clients, through the suspension of certain services, to the revocation of the license.
For the fintech partner, this situation is paradoxical. On the one hand, they bear no direct legal responsibility for the sponsor's failures, but on the other, they become "hostage" to the sponsor's problems.
How to protect yourself against “reg-risks”?
Modern fintech companies are embracing a multi-sponsoring readiness strategy . This involves designing product architectures so that migrating a BIN or BaaS provider is a technical process, not an existential crisis.
2. Operational continuity risk: Combating downtime and chaos
The second pillar of threats is operational risk, which directly impacts the daily user experience. Problems with the regulatory infrastructure provider can manifest themselves in interruptions in card issuance, transaction blockages at POS terminals, or delays in settlements . In the age of social media, even a few hours of downtime in payment card operations generates communication chaos and an avalanche of complaints, which fintech companies must manage, even though the cause of the outage lies outside their systems.
The foundations of operational resilience
The key to security is technological decoupling – a model in which the fintech fully controls the account’s business logic, digital wallet, and customer data, and only collects the necessary regulatory layer from the sponsor.
As part of business continuity plans (BCP), detailed runbooks are created in the event of a card issuer change ( reissuance ). Having pre-tested, ready-to-activate integrations with another sponsor (so-called fallback ) is now becoming standard for companies in the fintech industry.
As a technology partner, a fintech should implement a business continuity plan (BCP ). This includes preparing for the migration of services to an alternative card issuer ( BIN sponsor ) to ensure service continuity.
Summary
The Banking as a Service (BaaS) model is based on a clearly defined division of roles between the regulated entity and the technology partner. This division allows fintech companies to develop innovative financial products quickly, scalably, and in compliance with regulations, without the need to acquire a banking or payment license themselves.
In practice, this means that:
BIN sponsor is responsible for licensing, compliance, relations with the regulator and formal issuance of cards,
Fintech is responsible for technology, product, user experience and customer communication.
A key consequence of this model is that revoking a sponsor's BIN license doesn't necessarily mean the end of the fintech's operations . While such a situation may have an operational impact and require adjustments, it doesn't constitute a violation of the law on the part of the technology partner or automatically terminate the product program.
Fintech companies today design their solutions in a way that enables:
change of BIN sponsor or BaaS provider,
migration of card programs,
maintaining continuity of services and customer protection,
transparent communication with the market and partners.
Therefore, in the BaaS ecosystem, a regulatory incident involving a licensed entity is a test of the partner model's resilience, not its denial. A fintech's strength is determined not by whether it utilizes BIN Sponsorship, but by its ability to manage regulatory risk, maintain customer trust, and ensure business continuity even in challenging market conditions.
