Financial technology startup, Synapse, has abruptly collapsed despite investment from venture capital firm, a16z. This unanticipated breakdown has left almost 10 million customers and around 100 dependent fintechs in a predicament. This sudden collapse has significantly disrupted the financial ecosystem, creating a void that threatens to challenge fintech integrations.
Based in San Francisco, Synapse functioned as a facilitator for Evolve Bank & Trust and Mercury, allowing seamless incorporation of banking services into other fintech operations. Regrettably, the startup recently faced a series of setbacks that led to a loss of support from both these entities.
Despite raising over $50 million from venture capital, Synapse’s financial difficulties proved insurmountable. A failed attempt to sell their assets for $9.7 million further deepened their crisis. Ultimately, Synapse was forced to file for Chapter 11 bankruptcy, raising questions about the sustainability of fintech startups and the impacts on financial technology services.
With the bankruptcy of Synapse, other fintech startups have begun to feel the pressure. Copper, a teen banking startup, had to stop its operations, while Juno’s cryptoucurrency users were locked out amidst Synapse’s financial problems.
Synapse’s downfall disrupts fintech sector
Similarly, financial health startup Kipp and Sable, a banking platform for internationals were forced to suspend services. The personal finance app Simplifi also faced difficulties, leading to major customer dissatisfaction.
The effects of Synapse’s dissolution were felt beyond the fintech industry, including Mainvest, a fintech lending company that served the restaurant industry. The precise number of jobs that have been lost due to this shutdown remains unclear.
Industry expert, Jason Mikula, estimates that Synapse’s downfall might have impacted around a hundred fintech companies and ten million customers. Mikula suggests that the ramifications could be widespread, affecting business operations beyond just payroll. This includes areas like administration and customer service, proving detrimental to many small businesses. He implies that the effects of this collapse will be far-reaching and long-lasting for the industry.
The sudden downfall of Synapse endangers the entire fintech industry and creates potential for significant harm, especially for customer-focused services. It underscores the importance of contingency plans and enhanced safety measures in the fintech sector, especially considering the knock-on effects on service provision, data security, and financial losses.
