Dangers of the Decline in Fintech Investment

Synapse, supported by a16z, has failed, potentially harming 10 million customers. 100 fintechs may be in danger, and many more may have less hope for investment. The fintech startup scene, which was the epitome of the 2021 venture capital heydays, started to fall apart last year as VC investment became more scarce. As we enter the middle of 2024, a sizable portion of the industry is in complete disarray, particularly the banking-as-a-service sector, which experts paradoxically informed us was the bright point last year.

Perhaps the most spectacular development now occurring is the bankruptcy of the banking-as-a-service (BaaS) fintech company Synapse. Even while it's not the only piece of bad news, the fact that one major company in the frequently interdependent fintech industry experiences difficulties highlights how dangerous things may get.

In summary: Synapse, a San Francisco-based company, provided a service that let other parties, primarily fintechs, incorporate banking services into their products. For example, Synapse was utilized by a software company that specialized in payroll for organizations with a high number of 1099 contractors to offer a fast payment function; other users used it to create credit/debit cards with specific features. For instance, it served as a middleman between business banking startup Mercury and banking partner Evolve Bank & Trust until last year, when Mercury and Evolve made the decision to deal directly with one another and eliminate Synapse.

Healy Jones of Kruze Consulting thinks that going ahead, the Synapse scenario will be