Enterprise Synapse, based in San Francisco,announced bankruptcy, impacting various fintech companies and approximately 10 million consumers nationwide. This development has elicited concerns about potential interruption of transaction processing among other services.
The bankruptcy has had a ripple effect on the banking-as-a-service (BaaS) sector, accentuating the challenges it has been facing since 2024. Banking institutions dependent on Synapse’s BaaS solutions find themselves struggling to adapt.
The bankruptcy also disrupted partnerships between Synapse and corporations such as Evolve Bank & Trust and business startup Mercury, culminating in a distress sale worth around $9.7 million to finance tech firm TabaPay. The event has highlighted the unpredictability of the market and the necessity of adaptable business models.
San Francisco’s Synapse bankruptcy shakes fintech sector
The causes for Synapse’s downfall remain unclear with CEO Sankaet Pathak pointing fingers at Evolve and Mercury. There could potentially be Chapter 7 liquidation, leaving many customers unsure about the access to their funds.
Following the bankruptcy, banking startup Copper had to cease operations, cutting off many patrons, predominantly families, from cash access. However, Copper’s financial education application, Earn, remains functional and there are plans to transition towards a family banking product.
This bankruptcy has also affected crypto application Juno with clients losing access to significant funds. Mainvest, a fintech lender to restaurants, is also facing potential closure in the fallout from Synapse’s bankruptcy.
According to Jason Mikula from Fintech Business Weekly, this could lead to significant disruption for up to 100 fintech companies and around 10 million final consumers. The implications for the financial industry could be expansive, affecting around 10 million consumers who rely on services provided by these fintech companies.
