Editor's Choice Europe Paytech

Lifeline for Railsr But Experts Warn of BaaS Headwinds Ahead

Embedded finance platform Railsr has finally found a suitor following months of sale rumours and talk of an investigation by the Financial Conduct Authority (FCA). But does its recent uncertainty spell trouble ahead for other banking as as service (BaaS) platforms?

Railsr has been purchased and re-capitalised by Embedded Finance Limited, backed by global investors including D Squared Capital, Moneta VC and Ventura Capital.

The transaction included Railsr’s embedded finance platform and banking-as-a-service business, as well as a number of subsidiaries in its group. This included several of its international subsidiaries and its UK regulated subsidiary, PayrNet Limited.

The sale followed the appointment of joint administrators at global consultancy firm Alvarez & Marsal to secure the future of the business as a going concern and provided continuity of service for Railsr customers.

Formerly known as Railsbank, Railsr is a principal Visa and Mastercard issuer and provides banking-as-a-service and cards-as-a-service. Its offerings include card issuing, virtual wallets and BIN sponsorship.

The company’s APIs makes it easy for developers to integrate banking and card functionality into their products and services. The Railsr platform, designed to be flexible and customisable, allows customers to focus on their end-user-embedded finance experience while Railsr managed financial regulation.

It also delivered streamlines connectivity to popular payment schemes like SEPA, UKFP, BACs, and SWIFT and looks to the improvement of customer operations.

From highs to lows

In early 2022, the BaaS provider enjoyed a $250million valuation, with growth projections suggesting the company would reach unicorn status. Pair this with Juniper Research‘s predictions that the embedded finance market would exceed $183billion globally by 2027, and the future looked rosy.

But funding dried up amid a tough environment for all fintechs.

In October 2022, Railsr’s Series C funding round received $46million, a figure far short of the $100million it was reportedly seeking. The fundraise constituted $26million of equity and $20million of debt. The equity portion was led by Anthos Capital, who led the Railsr Series B in July 2021, and includes other existing investors spanning Europe, North America and Asia – Ventura, Outrun Ventures, CreditEase and Moneta. The debt portion of the round was with Mars Capital, a new investor in the company.

In January, talks of a sale to Nigerian paytech Flutterwave emerged but soon fell flat.

In February 2023, it was also reported that the company’s European payments unit PayRNet was under investigation for money laundering in Lithuania. The Central Bank of Lithuania stated PayRNet could “not establish business relationships with new clients, as well as intermediaries and persons distributing and/or redeeming electronic money of this institution”. The investigation is ongoing.

Going once, going twice, sold!

This month has taken a more positive turn. The change of control to Embedded Finance Limited – a move backed by the FCA – ensures business continuity for Railsr‘s customers, and more than five million end users.

Rick Haythornthwaite, chair of the board
Rick Haythornthwaite, chair of the board

Rick Haythornthwaite, chair of the board, said he was “absolutely delighted” that Railsr is now able to “rebuild momentum and return to growth”.

“It is a business that deserved to be recapitalised,” he said. “Railsr has a best-in-class technology platform that has already given hundreds of fintech customers competitive advantage.

“A huge number of people across the financial ecosystem believe in Railr’s potential and have worked very hard to make this transaction a reality. We will now get back to basics and manage the business methodically and constructively. We have secured a new chapter for Railsr and are excited about what the future holds.”

Following the sale, Haythornthwaite remains chair of the Railsr board.

What’s next?

Given the enormity of Railsr, and the number of organisations that rely on the company’s services, we reached out to the industry to gauge their views on the sale.

Good news

Miron Lulic, CEO and founder of SuperMoney.com, the lending comparison site, said: “The financial services industry is highly resilient and adaptable. The Railsr platform is compelling, and I’m glad to see it has found new investors that see its potential.

“However, in the unlikely event that Railsr is unable to continue providing its services, there are plenty of other banking as a service providers that will be happy to pick up the slack.”

Area to watch

Jonah Crane, partner at financial advisor Klaros, commented: “Railsr was known as a leader in banking as a service in the European market, with visions of developing a global platform. And their challenges may well stem from unique, company-specific factors. However, the banking as a service space faces some notable headwinds:

  • “It’s become a crowded and competitive space, where growth means competing more directly with adjacent providers (see Marqeta‘s expansion from card issuance to embedded finance).
  • “And BaaS platforms are experiencing pressure on both sides of the platform: fintech is going through a bear market, while bank sponsors are under regulatory pressure and face economic uncertainty.

“I would be surprised if there’s not some consolidation among US BaaS providers in the short term. Longer term, the case for BaaS and embedded finance is still very strong, so the survivors – and the banks who support them – will have a large opportunity ahead of them.

“The European market, where Railsr was initially focused, may present fewer – or different opportunities than the US. The combination of PSD2, a more concentrated banking sector, bespoke licenses for payments (the EMI licence) all combine to enable fintechs to access the market more easily and directly in Europe than the US.”


  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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