There are good reasons for caution. “Memberization” rules make it difficult to support programs that extend outside defined fields of membership.

Cultural fit is another factor. As North Bay CEO Chris Call explains, credit unions are traditionally conservative, close-knit organizations. BaaS requires a level of expertise and investment in compliance tools and staffing that many simply haven’t built yet.

Regulatory uncertainty adds yet another layer of complexity. While bank regulators have issued BaaS guidance, the NCUA has been quieter – acknowledging only that they’re “studying the issue.”

Legacy Systems Pose Technical Hurdles

Even credit unions that want to explore BaaS often face a common challenge: Legacy core systems. Most were never designed for the real-time, high-volume activity required to support fintech partners and embedded banking use cases.

This leads to operational breakdowns – missed reconciliation windows, delayed settlements and limited visibility across thousands of end users. The recent collapse of the Synapse–Evolve Bank partnership is a reminder that without real-time ledgering and transparent subaccounting, BaaS programs are vulnerable.

The Digital Twin Approach: A Practical Path Forward

One way forward is the digital twin approach – a real-time ledgering layer that supports fintech partnerships without placing additional strain on the credit union’s core.

In this model, the core system maintains a single "for benefit of" (FBO) account, while the digital twin manages end-user subaccounts off-core. Some models even support fintechs supplying subaccount data directly, eliminating the need for FBO structures entirely.

This allows credit unions to:

• Synchronize real-time transactions or post daily net updates;
• Maintain a full ledger of subaccount balances and transaction histories;
• Reduce reconciliation risks; and
• Remain compliant with subaccount tracking and audit requirements.

For credit unions, the digital twin offers a middle ground – more control than outsourcing, but less complexity than rebuilding systems internally. It enables modern BaaS participation while preserving the stability and oversight credit unions are known for.

A Natural Fit for Credit Unions

BaaS doesn’t have to mean abandoning what makes credit unions special. In fact, credit unions’ strong community roots and member-first values can create authentic, purpose-driven partnerships with fintechs and local businesses alike.

BaaS is no longer a fringe experiment. It’s fast becoming a core banking strategy. Institutions that embrace it are already seeing two to three times growth compared to peers. The opportunity is clear: New revenue, new partnerships and new reach.

Start With the Right Foundation

For credit unions, stepping into BaaS doesn’t require abandoning caution. It just requires the right architecture and a clear-eyed strategy. Models like digital twin offer a way to participate at your own pace, without overhauling what already works.

It’s not a question of “innovate or die.” It’s a question of how credit unions can thoughtfully modernize while staying true to their mission and thrive in a world that’s moving faster every day.