Another fintech startup and its clients have been severely affected by the Implosion of banking-as-a-service startup Synapse.
Copper Banking, a digital banking service aimed at teens, notified its customers on May 12 that it would suspend bank deposit accounts and debit cards on May 13. In a letter to customers, CEO and co-founder Eddie Behringer said the company had learned the previous week that the banking middleware provider they used, Synapse, was “imminently” shutting down its service.
“Despite our prior planning, this event has forced us to close bank accounts much sooner than expected,” he wrote.
Synapse filed for Chapter 11 bankruptcy reorganization on April 22 with plans to sell its assets to TabaPay for $9.7 million. But that sale failed and last week, a U.S. trustee filed an emergency motion asking the judge to convert it to a Chapter 7 liquidation bankruptcy.
The discontinuation of Copper Banking bank accounts and debit cards means that some Copper customers do not have access to their funds. Behringer says he is working with his banking partners, AMG National Trust Bank and Synapse, to return their money as soon as possible.
Behringer said that as soon as it heard the news that the TabaPay deal was in jeopardy, it began returning customer funds, so only a small, single-digit number of its customers did not receive their funds before that the service was closed.
Copper now plans to offer a white-label family banking product later this year in partnership with “big banks across the United States,” as Behringer told TechCrunch in an interview he couldn’t yet name. The company had been planning to move in that direction for the past year, he added, but the process was accelerated by the demise of Synapse.
Copper remains operational offering customers its direct-to-consumer financial education product, Earn, according to Behringer. Earn pays teens credits to play games, take surveys, scan receipts, refer friends, and once users reach a certain credit threshold, they are paid cash (500 credits for $5), she says. The goal is to teach children about finances. Make money through that by partnering with other institutions.
That product, he said, launched just under a year ago and has seen 160% year-over-year revenue growth. Since then, it has provided the “majority” of Copper’s revenue, as the company makes money through partnerships with brands that want feedback on their products. The 30-person company remains intact, Behringer said, and is still hiring.
He claims that because Earn’s growth is so strong, Copper is still “on track to reach near profitability this year” and, in addition to the cash it raised from its venture capital fundraising, has “more than four years of trajectory”.
In April 2022, Copper raised $29 million in a Series A financing round led by Fiat Ventures. It has raised a total of $42.3 million since its inception in 2019. Other backers include Panorámica Ventures, Insight Partners and Invesco Private Capital. At the time, the company had said its revenue came primarily from interchange fees.
AMG National Trust Bank and Synapse could not be reached for comment at the time of publication. It appears Copper’s customers may not be alone. At an emergency hearing last week, it was reported ForbesA US bankruptcy court judge described Synapse’s problems as “a situation where tens of millions of people do not have access to potentially hundreds of millions of dollars of their deposits.”
And Jason Mikula of Fintech Business Weekly reported Following Friday’s bankruptcy hearing, “Numerous fintech end users who had their ability to access their funds frozen shared the devastating impact it has had on their lives with the court and the hundreds of attendees who attended the hearing.” ”.
The copper problems could be another example of a trend of consumer fintechs towards B2B. Earlier this year, TechCrunch reported that the Miami-based company private onyxa Y Combinator-backed digital bank that provided banking and investment services for high-income Millennials and Generation Z, there was also ended its consumer banking operations. At the time he said he would shift to a “white-label B2B platform-as-a-service model for community banks, regional banks and credit unions” that want to launch digital apps designed for young and wealthy consumers.
Want more fintech news in your inbox? Sign up to TechCrunch Fintech here.
Do you want to reach out with advice? Email me at maryann@techcrunch.com or message me on Signal at 408.204.3036. You can also send a note to 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 applications.