Close Menu
fintechbits
  • News
  • AI
  • Acquisitions
  • Trends
  • Opportunities
  • Insights
  • Rumors
  • Regulatory
  • Startups
  • Innovations

Subscribe to Updates

Get the latest news from Fintechbits.

Trending Now

SG Company secures a 51% stake in FinTUP Fintech K2 Capital

May 27, 2025

How Artificial Intelligence Influences the Future of Financial Services

May 27, 2025

The Startup Fintech secures $7.5 million to streamline financial management for consumers and small-to-medium businesses.

May 27, 2025

Workday introduces new AI agents to revolutionize hiring, finance, and frontline operations.

May 27, 2025
Facebook X (Twitter) Instagram
Trending
  • SG Company secures a 51% stake in FinTUP Fintech K2 Capital
  • How Artificial Intelligence Influences the Future of Financial Services
  • The Startup Fintech secures $7.5 million to streamline financial management for consumers and small-to-medium businesses.
  • Workday introduces new AI agents to revolutionize hiring, finance, and frontline operations.
  • MONEYCONTROLFLIPKART plans to recruit 5,000 employees this year amid rapid trading in fintech and the rise of AI, marking the largest hiring effort in recent years. This expansion is connected to their focus on pivotal growth markets.
  • Turkish Fintech Papara Under Investigation for Potential Money Laundering Activities
  • Jason Cao from Huawei outlines the direction of AI-driven digital banking.
  • UBS adopts AI avatars to streamline analyst reports in Fintech Schweiz Digital Finance News.
Facebook X (Twitter) Instagram Pinterest Vimeo
fintechbits
  • News

    Turkish Fintech Papara Under Investigation for Potential Money Laundering Activities

    May 27, 2025

    The Fintech Agreement aims to secure lower-cost funding from Africa.

    May 26, 2025

    The CEO of Lead Bank advocates for discussing a narrative at the premier Fintech event.

    May 22, 2025

    Breaking: Jaywing purchased by London Fintech in a highly complementary deal.

    May 21, 2025

    The $2.6 Trillion Revolution: Inside 2025’s Private Credit BoomHow a once-niche asset class is redefining modern finance

    May 21, 2025
  • AI

    How Artificial Intelligence Influences the Future of Financial Services

    May 27, 2025

    Workday introduces new AI agents to revolutionize hiring, finance, and frontline operations.

    May 27, 2025

    Jason Cao from Huawei outlines the direction of AI-driven digital banking.

    May 27, 2025

    UBS adopts AI avatars to streamline analyst reports in Fintech Schweiz Digital Finance News.

    May 27, 2025

    Builder.a’s Founder Proposes a Potential Acquisition for a Distressed Company

    May 26, 2025
  • Acquisitions

    The HPS of Morocco plans to acquire a Fintech company by 2027, referred to as CEO – TradingView News.

    May 3, 2025

    The Challenges of Implementing Central Bank Digital Currencies (CBDCs)

    April 14, 2025

    Apex Fintech considering the purchase of Bakkt

    April 13, 2025

    The Future of Digital Wallets: Trends to Watch

    April 12, 2025

    What Is Blockchain and How Is It Used in Finance?

    April 11, 2025
  • Trends

    The $2.6 Trillion Revolution: Inside 2025’s Private Credit BoomHow a once-niche asset class is redefining modern finance

    May 21, 2025

    The Transformative Power of Generative AI in Financial Services: Innovation, Implementation, and Impact

    May 16, 2025

    Latin America’s Fintech Sector Poised to Reach 49.58 Billion USD

    May 1, 2025

    Analysis of Industry Market Size in the 2025 Fintech Market Report

    April 28, 2025

    Analysis of Trends and Key Drivers in India’s Blockchain Fintech Sector

    April 23, 2025
  • Opportunities

    Biannual Work in Barcelona Employment and Information Fair Returns on May 21 with 40 Organizations and Over 2,000 Participants

    May 22, 2025

    Treasury Engages in Discussions with Fintech Unicorns About Joining the London Stock Exchange

    May 20, 2025

    Top Fintech Employers of 2025

    May 15, 2025

    Governor Kelly reveals collaboration with FISERV to establish a fintech strategic hub.

    April 23, 2025

    Governor Kelly reveals Fiserv’s plans to establish a strategic fintech center in Kansas, generating 2,000 jobs.

    April 23, 2025
  • Insights

    Fintech company Airwallex exceeds a valuation of $6 billion in its latest funding round.

    May 24, 2025

    Fintech Airwallex reaches a valuation exceeding $6 billion in its latest funding round.

    May 22, 2025

    Bath Capital guides targeted investment in Acrisure’s growth initiatives.

    May 22, 2025

    Fintech Airwallex reaches a valuation exceeding $6 billion in its most recent funding round.

    May 21, 2025

    The $2.6 Trillion Revolution: Inside 2025’s Private Credit BoomHow a once-niche asset class is redefining modern finance

    May 21, 2025
  • Rumors

    Motorola Considers $4.5 Billion Investment in Wireless Radio and Other Speculations

    May 25, 2025

    404 Error – Page Unavailable on Coinspeaker

    May 22, 2025

    Brighthouse Financial executives address misleading rumors and inconsistent first-quarter figures in insurance news.

    May 16, 2025

    FortunePayoneer delayed guidelines for 2025 and sought a buyer in November.

    May 11, 2025

    Nubank refutes speculation about a fence during the surge in misinformation.

    May 7, 2025
  • Regulatory

    The FMA reveals the participants in the Sand Tips Fintech program.

    May 25, 2025

    Fintech Groww Targets 800 Million Dollar Initial Public Offering

    April 26, 2025

    Wolters Kluwer Receives the Prix Fintech Breakthrough Award 2025 for its Onesumx Solution

    April 22, 2025

    Partner in Fintech Founders launches a new Self-Regulatory Organization

    April 19, 2025

    Razorpay founders highlight the need for transparent and consistent regulations to support Fintech growth in India.

    April 17, 2025
  • Startups

    SG Company secures a 51% stake in FinTUP Fintech K2 Capital

    May 27, 2025

    The Startup Fintech secures $7.5 million to streamline financial management for consumers and small-to-medium businesses.

    May 27, 2025

    MONEYCONTROLFLIPKART plans to recruit 5,000 employees this year amid rapid trading in fintech and the rise of AI, marking the largest hiring effort in recent years. This expansion is connected to their focus on pivotal growth markets.

    May 27, 2025

    The initial Egyptian space agreement marks the beginning of a new phase for development and public procurement.

    May 26, 2025

    Monarch’s Personal Finance Application Gains $75 Million Despite Challenges for Fintech Startups – NBC4 Washington

    May 24, 2025
  • Innovations

    Top 10 Nations Leading in Technological Innovation by 2025

    May 22, 2025

    New Course Overview: Successful Fintech Strategies

    May 20, 2025

    How Malta’s iGaming Framework Promotes Innovation in European Fintech

    May 18, 2025

    Fintech vs. Big Banks: Who Will Win the Battle for Gen Z’s Wallet?

    May 13, 2025

    Key Innovations Transforming Careers in Fintech

    May 6, 2025
fintechbits
Home » a16z-backed Synapse has collapsed, potentially affecting 10 million consumers
Startup News

a16z-backed Synapse has collapsed, potentially affecting 10 million consumers

8 Mins Read
Facebook Twitter Pinterest Telegram LinkedIn Tumblr Email Reddit
Gettyimages 1337070085.jpg
Share
Facebook Twitter LinkedIn Pinterest Email Copy Link

Last year, the world of fintech startups — star of the heyday of venture capital in 2021 — began to collapse as venture capital funding became more limited. As we approach mid-2024, large swaths of the industry are now in a complete mess, particularly the banking-as-a-service (BaaS) sector, which ironically, Last year, experts told us that was the positive.

The bankruptcy of fintech BaaS Synapse is perhaps the most dramatic event of the moment. While it is certainly not the only bad news, it shows how perilous things can be for the often interdependent fintech world when a key player runs into trouble.

Synapse’s troubles have hurt many other startups and affected consumers across the country.

To recap: San Francisco-based Synapse operated a service that allowed others (primarily fintechs) to integrate banking services into their offerings. For example, a software provider specializing in payroll management for 1099-heavy companies used Synapse to provide an instant-pay feature; others used it to offer specialized credit/debit cards. Until last year, for example, it provided such services as an intermediary between banking partner Evolve Bank & Trust and investment banking startup Mercury, until Evolve and Mercury decided work directly with each other and eliminate Synapse as an intermediary.

Synapse has raised a total of just over $50 million in venture capital over its lifetime, including a seed round in 2019. $33 million Series B fundraising led by Angela Strange of Andreessen Horowitz. The startup faltered in 2023 with layoffs And filed for chapter 11 in April this year, hoping to sell its assets in a $9.7 million fire sale to another fintech, TabaPay. TabaPay has worked. It’s unclear why. Synapse has blamed Evolve and Mercury, both of whom have raised their hands and told TechCrunch they weren’t responsible. After responding, Synapse CEO and co-founder Sankaet Pathak has stopped responding to requests for comment.

But the result is that Synapse is now on the verge of being forced to liquidate entirely under Chapter 7 and many other fintechs and their customers are paying the price for Synapse’s demise.

For example, teen banking startup Copper, a Synapse customer, had to abruptly discontinue bank deposit accounts and debit cards on May 13, due to Synapse’s difficulties. This leaves an unknown number of consumers, mostly families, without access to funds they had deposited in trust in Copper accounts.

Copper, for its part, says it is still operational and has another product, its financial education app Earn, which is unaffected and doing well. However, it is currently working to evolve its business into a white-label family banking product in partnership with other major U.S. banks, which it hopes to launch later this year.

Crypto app Juno’s funds were also affected by Synapse’s collapse, CNBC reported. A Maryland teacher named Chris Buckler said in a May 21 filing that he was unable to access his funds held by Juno due to issues surrounding Synapse’s bankruptcy,

“I am becoming more and more desperate and do not know where to turn,” Bucker wrote, as reported CNBC“I have almost $38,000 tied up because of the shutdown of transaction processing. It took me years to save this money.”

Meanwhile, Mainvest, a fintech lender to restaurant businesses, is actually close Due to the difficult situation at Synapse, an unknown number of employees have lost their jobs. On its website, the company stated: “Unfortunately, after exploring all available alternatives, a combination of internal and external factors has led us to the difficult decision to cease operations of Mainvest and dissolve the company.”

According to Synapse’s filings, as many as 100 fintechs and 10 million end customers could have been affected by the company’s collapse, industry observer and Fintech Business Weekly author Jason Mikula estimated in a statement to TechCrunch.

“But that may underestimate the extent of the damage,” he added, “because some of these customers are in the payroll business for small businesses.”

The long-term, severe negative impact of what happened at Synapse will be significant “across all of fintech, especially consumer-facing services,” Mikula told TechCrunch.

“While regulators do not have direct jurisdiction over middleware vendors, which include companies like Unit, Synctera and Treasury Prime, they can “Banks are exerting power over their banking partners,” Mikula added. “I expect to see increased focus on ongoing financial due diligence of these types of middleware providers, none of which are profitable, and increased focus on business continuity and operational resilience for banks engaged in BaaS operating models.”

Perhaps not all BaaS companies should be lumped together, as Peter Hazlehurst, founder and CEO of another BaaS startup, Synctera, was quick to point out.

“There are mature businesses with legitimate use cases that are served by companies like ours and Unit, but the damage from some of the fallout you’re talking about is only now rearing its ugly head,” he told TechCrunch. “Unfortunately, the problems many people are experiencing today were built into the platforms years ago and have been compounded over time, not being visible until the last minute when everything falls apart at once.”

Hazlehurst says some classic Silicon Valley mistakes were made by early movers: people with computer engineering backgrounds wanted to “disrupt” the old, cumbersome banking system without fully understanding it.

“When I left Uber and founded Synctera, it became very clear to me that the early players in the ‘BaaS’ space built their platforms as quick fixes to exploit a neo/challenger banking ‘trend’ without a real understanding of how to manage the programs and the risks involved,” Hazlehurst said.

“Banking and finance, whatever it may be, is a serious business. It requires both skill and wisdom to set up and run. There are regulators that protect consumers from negative outcomes like this for good reason,” he adds.

He adds that in those heady times, banking partners – who should have known better – were not playing a supportive role in choosing fintech partners. “Working with these players seemed like a really exciting opportunity to ‘scale’ their business, and they trusted them blindly.”

To be fair, it’s not just BaaS players and the neobanks that rely on them that are in trouble. We see constant reports about how banks are being scrutinized for their relationships with BaaS providers and fintechs. For example, the FDIC was “concerned” that Choice Bank “opened… accounts in legally risky countries” on behalf of Digital banking startup Mercuryaccording to a report by The informationAuthorities also reportedly reprimanded Choice for letting Mercury’s foreign customers “open thousands of accounts using questionable methods to prove they were present in the United States.”

Healy Jones of Kruze Consulting believes that Synapse’s situation will no longer be a “problem” for the startup community in the future. But he believes regulatory clarity for consumer protection is needed.

The FDIC should “clearly spell out what is and isn’t covered by FDIC insurance in a neobank that uses a third-party bank on the back end,” he said. “That will help calm the neobank industry.”

As Gartner analyst Agustin Rubini told TechCrunch: “The Synapse case underscores the need for fintech companies to maintain high operational and compliance standards. As middleware providers, they must ensure accurate financial record keeping and transparent operations.”

From my perspective, as someone who has covered the ups and downs of fintech for years, I don’t think all BaaS players are doomed. But I do think this situation, combined with all the increased scrutiny, could make banks (both traditional and fintech) more hesitant to work with a BaaS player, choosing instead to establish direct relationships with banks as Copper hopes to do.

The banking industry is highly regulated and extremely complex, and when Silicon Valley players make mistakes, ordinary human beings suffer.

The rush with which fintech companies deployed capital in 2020 and 2021 pushed many companies to move quickly, in part to satisfy investors hungry for growth at all costs. Unfortunately, fintech is an area where companies can’t move so quickly that they have to take shortcuts, especially those that avoid compliance. The end result, as we’re seeing in Synapse’s case, can be disastrous.

With the fintech sector already experiencing a funding crunch, it is very likely that the Synapse debacle will impact future fundraising prospects in the fintech sector, particularly for banking services companies. Fears of another collapse are real and, let’s face it, justified.

Want more fintech news delivered to your inbox? Sign up for TechCrunch Fintech here.

Have a tip you’d like to share? Email me at maryann@techcrunch.com or message me on Signal at 408.204.3036. You can also message the entire TechCrunch team at tips@techcrunch.com. For more secure communications, Click here to contact uswhich includes SecureDrop (instructions here) and links to encrypted messaging apps.

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Posts

SG Company secures a 51% stake in FinTUP Fintech K2 Capital

May 27, 2025

The Startup Fintech secures $7.5 million to streamline financial management for consumers and small-to-medium businesses.

May 27, 2025

MONEYCONTROLFLIPKART plans to recruit 5,000 employees this year amid rapid trading in fintech and the rise of AI, marking the largest hiring effort in recent years. This expansion is connected to their focus on pivotal growth markets.

May 27, 2025
Leave A Reply Cancel Reply

Latest news

SG Company secures a 51% stake in FinTUP Fintech K2 Capital

May 27, 2025

How Artificial Intelligence Influences the Future of Financial Services

May 27, 2025

The Startup Fintech secures $7.5 million to streamline financial management for consumers and small-to-medium businesses.

May 27, 2025
News
  • AI in Finance (1,199)
  • Breaking News (147)
  • Corporate Acquisitions (45)
  • Corporate Acquistions (17)
  • Industry Trends (169)
  • Jobs Market News (287)
  • Market Insights (175)
  • Market Rumors (230)
  • Regulatory Updates (142)
  • Startup News (791)
  • Technology Innovations (147)
  • X Feed (1)
About US
About US

FintechBits is an blog delivering the latest news and insights in fintech, finance, and technology. We cover breaking news, market trends, innovations, and expert opinions to keep you informed about the future of finance

Facebook X (Twitter) Instagram Pinterest Reddit TikTok
News
  • AI in Finance (1,199)
  • Breaking News (147)
  • Corporate Acquisitions (45)
  • Corporate Acquistions (17)
  • Industry Trends (169)
  • Jobs Market News (287)
  • Market Insights (175)
  • Market Rumors (230)
  • Regulatory Updates (142)
  • Startup News (791)
  • Technology Innovations (147)
  • X Feed (1)
Happening Now

November 28, 2024

“ Intentionally collaborative ”: how the Rotman school of U of T leads Innovation Fintech

February 6, 2025

‘1957 Ventures’ to Drive FinTech Innovation in Saudi Arabia

September 10, 2024
  • About FintechBits
  • Advertise With us
  • Contact us
  • Disclaimer
  • Privacy Policy
  • Terms and services
  • BUY OUR EBOOK GUIDE
© 2025 Designed by Fintechbits

Type above and press Enter to search. Press Esc to cancel.