Your Own Licence or a Partner's? Agent, BaaS and Direct Licensing Compared

Excerpt: Launching under someone else's licence is fast. Owning your own gives you control. The right choice depends on your stage, your margins and how much risk you are willing to leave in a partner's hands.

Every fintech that moves money eventually faces the same strategic question: should we operate under a regulated partner's licence, or become regulated ourselves?

There is no universally correct answer. Many successful companies launched under a partner and later obtained their own licence. Others applied from day one and never looked back. What matters is choosing deliberately – understanding what each model gives you, what it costs and what it leaves outside your control.

The three main models

1. Agent or distributor of a licensed institution

Under EU payment services rules, a licensed payment institution or e-money institution can appoint agents to provide payment services on its behalf, and e-money institutions can use distributors to distribute and redeem e-money. The agent or distributor is registered through the licensed principal, which remains fully responsible for compliance.

In practice, this means you run the customer relationship and the product, while the principal's licence, safeguarding and regulatory obligations sit behind it. The principal will require you to follow its AML policies, onboarding rules and oversight processes.

2. Banking-as-a-Service or embedded finance partnership

In a BaaS model, a licensed bank or EMI provides accounts, IBANs, cards or payment rails through an API, and you build the customer experience on top. Depending on the structure, your customers may formally be customers of the licensed partner, with your company acting as a technology provider, programme manager or agent.

This model has enabled a large number of fintech launches in recent years, because it removes most of the licensing work at the start.

3. Your own licence

You apply for and hold your own authorisation – typically a payment institution, e-money institution or, for crypto services, a CASP licence. You carry full regulatory responsibility, hold your own capital, safeguard customer funds directly and build your own relationships with banks, schemes and acquirers.

Speed to market

Partner models win clearly on speed. With a well-prepared integration, a fintech can launch under a partner in a fraction of the time a licence application takes. A direct licence requires building governance, policies, capital and substance, preparing an application and waiting for the supervisor's review – a process that commonly takes many months.

For an early-stage business testing product-market fit, speed often matters more than control.

Cost and margins

Partner models reduce upfront costs but introduce ongoing ones. Partners typically charge platform fees, per-account or per-transaction fees and a share of interchange or FX revenue. As volumes grow, these costs grow with them.

A direct licence requires significant upfront investment – regulatory capital, compliance staff, systems, audits and legal work – but lets you retain more of the economics once you reach scale. The point at which owning a licence becomes cheaper than renting one depends on your model, but for many businesses it arrives sooner than expected.

Control and dependency

This is the factor founders most often underestimate.

Under a partner's licence, the partner decides which customers you can onboard, which countries you can serve, which products you can launch and how quickly you can change them. Its risk appetite becomes your risk appetite. If it tightens its policies, exits a vertical, is sanctioned by its regulator or ends the partnership, your business can be disrupted overnight – with limited recourse.

Recent years have shown this risk is real. Several BaaS providers in Europe and elsewhere have faced regulatory action or restrictions, and the fintechs built on them have had to migrate customers under pressure.

With your own licence, those decisions are yours – within the limits set by your regulator and your banking partners.

Banking relationships

Under a partner model, the partner holds the banking and safeguarding relationships. You benefit from its access, but you do not build your own.

With your own licence, you must secure safeguarding accounts, operating accounts and, depending on your model, acquiring or scheme relationships. This is harder at the start, but it gives you direct relationships you control, and the ability to add backup providers so that no single partner can stop your business.

Investor perspective

Investors look at both models, but they ask different questions. For partner-based fintechs, they assess concentration risk, contract terms and how easily the business could migrate. For licensed fintechs, they assess compliance quality, capital adequacy and regulatory history. A licence is often seen as a valuable asset in its own right – one that can support higher valuations and strategic interest from acquirers.

When to consider switching to your own licence

• Partner costs are eroding your margins as volumes grow
• Your product roadmap is limited by what the partner allows
• Your partner's risk appetite no longer matches your target customers or markets
• Dependency on a single partner has become a material business risk
• Investors or acquirers are asking about regulatory independence
• You are expanding into markets your partner does not cover

If several of these apply, it is worth starting the licensing process before the pressure becomes urgent. Migrating customers from a partner to your own licence takes planning, and the best time to prepare is while the partnership is still working well.

A hybrid path

Many businesses combine the models. They launch under a partner to prove the product, apply for their own licence in parallel and migrate once authorised. Others keep a partner for certain products or markets while operating their core business under their own licence. The key is to treat the partner stage as a deliberate phase – with an exit plan – rather than a permanent arrangement by default.

The bottom line

A partner's licence buys speed. Your own licence buys control, margin and independence. The right choice depends on where your business is today and where it needs to be in three years.

If you are weighing these options, planning a migration from a partner or preparing your first licence application, we can assess your model and outline the route that makes commercial sense.