Synapse Has Two Months To Find New Bank Partner

Nine-year-old Synapse Financial Technologies has long been a leader in banking-as-a-service, a niche of software providers offering startups a streamlined way to make use of financial infrastructure like checking accounts or access to bank-to-bank money transfers.

In short, Synapse empowers neobanks, fintechs offering banking services without having a bank charter. For 2022, the company touted $76 billion in annual transaction volume across 18 million end users. At one point, Synapse counted notable fintechs including neobank Dave, and business banking upstarts Rho and Mercury among its clients. As regulatory scrutiny of banking-as-a-service arrangements has increased, all of these customers have migrated away in favor of direct relationships with banks. In August of last year, FDIC-insured Evolve Bank and Trust, which had been the company’s primary banking partner, notified Synapse that it planned to end their relationship, according to a letter seen by Forbes. The breakup has turned messy after the discovery of a $14 million hole in a Synapse account at Evolve holding client funds. In response, Evolve is withholding a roughly $17 million payment owed to Synapse to cover the difference.