Bankrupt Banking-as-a-Service provider, Synapse, is preparing for an asset sale. This development comes after significant shifts in its business partnerships, leading to its collapse. The sale, managed by B Riley Advisory Services, is expected to draw interest from various industry players, with specified deadlines for initial indications and bids.
Synapse’s decline reflects challenges faced by the FinTech sector, particularly in maintaining partnerships. Its relationship with Mercury, a major customer, deteriorated when Mercury opted to partner directly with Evolve Bank & Trust, bypassing Synapse. This shift highlighted vulnerabilities in Synapse’s business model, which depended heavily on acting as an intermediary. Such dependencies have previously been flagged as risky, especially in a sector where strategic partnerships are critical. However, potential buyers may find value in Synapse’s established platform and customer base.
What Assets Are on Sale?
The sale encompasses Synapse’s BaaS platform, intellectual properties, and stakes in its subsidiaries, Synapse Credit and Synapse Brokerage. The company had served 120 FinTech clients and managed significant financial transactions before its downfall. Despite its operational challenges, these assets could appeal to companies looking to expand their digital financial services. Bidders must express interest and submit offers by early November, according to B Riley Advisory Services.
How Did Synapse Collapse?
Synapse’s collapse was precipitated by Mercury’s decision to work directly with Synapse’s banking partner, Evolve Bank & Trust. This decision removed Synapse’s role in the transaction chain, triggering a series of events that destabilized its operations. Synapse’s reliance on intermediary services highlighted the risks of not diversifying partnerships. The incident underscores the importance of a robust and flexible business model in the FinTech industry.
The broader FinTech landscape has experienced similar dynamics, where companies must adapt to survive. Industry reports suggest that many banks and credit unions have embraced FinTech collaborations, with a significant percentage viewing these relationships as essential. However, Synapse’s situation illustrates the complexity and risk of such partnerships, as echoed by Larson McNeil of J.P. Morgan Payments, who emphasized the need to understand the ecosystem’s intricacies.
Amid these challenges, Evolve Bank & Trust has taken steps to mitigate the impact on Synapse Brokerage end-users. Evolve has initiated a process to return funds held in trust, ensuring clients affected by the bankruptcy are informed of their options moving forward. This action reflects Evolve’s commitment to maintaining trust and transparency in the financial services sector.
Assessing the Synapse situation, it’s clear that adaptability and diversification are key for FinTech companies. The sector’s rapid evolution requires businesses to manage risks and capitalize on opportunities effectively. As new players consider acquiring Synapse’s assets, understanding the market landscape and building resilient business models will be crucial for sustainable growth. Buyers must weigh the potential benefits against the risks demonstrated by Synapse’s collapse.
