After a turbulent 12 months, Banking-as-a-Service (BaaS) startup Synapse has filed for Chapter 11 bankruptcy and its assets will likely be acquired by TabaPay, in response to the 2 firms.
The deal still must be approved by the bankruptcy court.
Founded in 2017 and based in Mountain View TabaPay is an quick money transfer platform that SoftBank backed with an undisclosed amount in 2022. It isn’t clear how much enterprise capital was raised.
Based in San Francisco Synapse, which operated a platform that enabled banks and fintech firms to develop financial services, Was Founded in 2014 by Bryan Keltner and Indian-born CEO Sankaet Pathak.
In 2019, TechCrunch reported on the corporate $33 million Series B raise led by Andreessen Horowitz after rebranding from SynapseFi. That was the corporate’s last known fundraiser. In total, it raised just over $50 million in enterprise capital. Other backers include Trinity Ventures and Core Innovation Capital.
When announcing the acquisition, TabaPay noted that Synapse had made the acquisition Deloitte’s 2023 Fast 500 shows growth of over 650% over five years. However, there have been two large-scale layoffs last 12 months, reflecting slowing growth.
Last October, Synapse 86 people laid off, i.e. around 40% of the corporate. This got here after the startup had already laid off 18% of its workforce last June. At the time, Synapse said that “current macroeconomic conditions” had begun to affect its customers and platforms, impacting its expected growth.
Apart from the incontrovertible fact that staff needed to be laid off, Synapse also bumped into trouble last 12 months after acting as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. When Evolve and Mercury decided to finish their respective relationships with Synapse and work directly with one another, Evolve and Synapse were reportedly separated in contradiction to one another as the connection soured.
In particular, the businesses reportedly blamed one another for “who was responsible for a ‘deficit’ of over $13 million in accounts ‘in favor of’ customer funds at Evolve, among countless other problems” dating back not less than three years. Neither company has ever addressed the allegations.
In one Medium contributionPathak said he was “excited” in regards to the acquisition and wrote: “By using TabaPay, customers become part of a thriving ecosystem of 15 banking partners, 16 network connections, over 2,500 existing customers and the expertise of the collective team.”
Rodney Robinson, the co-founder and CEO of TabaPay, said in a written statement that Synapse’s assets could be a “great and natural complement” to its existing services to enrich its offerings “together with ensuring continuity for Synapse customers and banks”.
Problems with Banking-as-a-Service
The entire banking-as-a-service space has been facing turmoil recently. Several industry players have announced layoffs over the past 12 months. Most recently Synctera cut around 15% of its workforce. Treasury Prime has cut half of its 100-person staff in February, a 12 months after the announcement a $40 million Series C raise. Figure Technologies, which incorporates Figure Pay, 90 people laid off – or about 20% of its workforce – last July.
Meanwhile, Piermont Bank reportedly recently cut ties with Startup Unit. Fintech Business Weekly reported.
BaaS refers to various kinds of business models, equivalent to: B. offering bank-like services to other players within the industry; or the availability of charter and banking services, but not the underwriting; or offering banking components, which is more of a fintech that isn’t a bank but offers some bank-like services without charter.
BaaS players faced challenges in 2023, particularly regulatory crackdowns. For example, greater than 13% of federal banking regulators’ serious enforcement actions last 12 months were attributable to those providing BaaS to fintech partners. Reports from S&P Global Market Intelligence.
Rohit Mittal, co-founder and CEO of stilt, which offers financial products and resources for immigrants, knows a bit about it. His company was acquired by JG Wentworth at the top of 2022.
Mittal noted in a post on X Although banking-as-a-service has been around for a decade, it continues to be an industry without several billion-dollar firms and writes: “Investors have burned through more than a billion dollars and created less value.” The entire The industry continues to be very small by way of the worth created by exits.”
He provided examples including Synapse and Solids lawsuits with investor FTV Capital made this public last October FTV demanded a refund of its money.
Regarding Solid, co-founder and CEO Arjun Thyagarajan told TechCrunch via email earlier this month: “The case has been resolved and FTV is therefore no longer involved in the business.”
There was also other M&A activity. Last June, FIS, the fintech giant that provides a wide selection of payment, banking and investment services, made the announcement Bond acquireda startup specializing in embedded finance.
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