Another fintech startup and its customers have been severely affected by the collapse of banking-as-a-service startup Synapse.
Copper Banking, a digital banking service targeting teenagers, notified customers on May 12th that it would stop processing bank accounts and debit cards on May 13th. In a letter to customers, CEO and co-founder Eddie Bellinger said the company learned last week that its banking middleware provider Synapse would be discontinued “soon.”
“Despite my advance planning, this event has forced me to close my bank account much earlier than expected,” he wrote.
Synapse filed for Chapter 11 bankruptcy protection on April 22, with plans to sell its assets to TabaPay for $9.7 million. However, that sale failed, and last week a U.S. trustee filed an emergency motion asking a judge to convert the company to Chapter 7 bankruptcy.
Due to the retirement of Copper Banking's bank accounts and debit cards, some Copper customers will no longer be able to access their funds. Bellinger said he is working with his banking partners, AMG National Trust Bank and Synapse, to return the funds as soon as possible.
Bellinger said it began returning funds to customers as soon as it heard the news that its deal with Tabapay was in jeopardy, so only a small single-digit number of customers had not received their funds before the service was suspended.
Copper now plans to partner with “major banks across the U.S.” to offer a white-label family banking product later this year, Behringer told TechCrunch in an interview, though he did not yet disclose names. The company had been planning to move in that direction for the past year, but the demise of Synapse has accelerated the process, he added.
Behringer said Copper remains open and offering its direct-to-consumer financial education product, Earn, to its customers. Earn pays out credits to teenagers by playing games, taking surveys, scanning receipts, and referring friends, and then pays out in cash once the user reaches a certain number of credits. (500 credits for $5), the company says. Its goal is to teach children about finance, and it makes money by partnering with other institutions.
He said the product was launched less than a year ago and has seen 160% year-over-year revenue growth. Since then, the company has made money through partnerships with brands that solicit feedback on its products, making up a “vast majority” of its revenue. Bellinger said the company, which employs 30 people, will remain in place and continue to hire.
Earn's growth has been so strong, he said, that Copper is still “on track to be almost profitable again this year,” adding that on top of the cash raised in VC funding, it's “well ahead of four years.” He claims to have a runway that surpasses all others.
In April 2022, Copper raised $29 million in a Series A funding round led by Fiat Ventures. Since its founding in 2019, it has raised a total of $42.3 million. Other backers include Panoramic Ventures, Insight Partners and Invesco Private Capital. At the time, the company said it primarily derives its revenue from interchange fees.
AMG National Trust Bank and Synapse could not be reached for comment at the time of writing. Apparently Copper's customers aren't the only ones having problems. As Forbes reported, in an emergency hearing last week, a U.S. Bankruptcy Court judge described the Synapse problem as “a situation in which tens of millions of people are unable to access hundreds of millions of dollars in savings.”
And as Fintech Business Weekly's Jason Mikula reported after Friday's bankruptcy hearing, “Many end-users of the fintechs whose access to their funds was frozen shared with the court the devastating impact it has had on their lives, with hundreds of people dialing in to attend the court hearing.”
The Copper issue may be another example of the trend of consumer fintech moving towards B2B. Earlier this year, TechCrunch reported that Onyx Private, a Miami-based Y Combinator-backed digital bank that provided banking and investment services to high-income Millennials and Gen Z, was also exiting consumer banking. Reported. At the time, the company said it would move to a “B2B white-label, platform-as-a-service model for community banks, regional banks, and credit unions” that wanted to launch digital apps built for younger, affluent consumers. said.
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