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The abrupt shutdown and Chapter 11 bankruptcy of financial technology company Synapse has led to tens of thousands of U.S. business and consumer bank accounts being frozen. Synapse, a middleman between fintech companies and banks, ceased operations in April, disrupting services for its partners, including Evolve Bank & Trust. This has left many customers unable to access their funds. Evolve Bank, which must ensure all deposits are accounted for, has stated it is well-capitalized despite the freeze affecting nearly 200,000 accounts. Other Synapse partners like Lineage Bank and Yotta have also been impacted, with customer complaints surfacing on forums. The collapse of Synapse has put millions at risk, though regulators believe the number affected will be in the thousands. Creditors are pushing for a Chapter 7 liquidation, which could worsen the situation. Fintechs, which rely on banks to manage funds without being banks themselves, often use intermediaries like Synapse for account management. Regulatory response is unclear as Synapse is not a bank and therefore not overseen by the Federal Reserve or FDIC. The Consumer Financial Protection Bureau may investigate. This incident underscores long-standing concerns about the fintech model's lack of protections, echoing past failures like the 2015 RushCard debacle. Credit: Ken Sweet via Fortune #fintech #synapse #banking #bankruptcy #finance #creditors #banks https://lnkd.in/etfdybqK

I have been waiting to chime in but wanted to see if more root cause information came out. A lot of it probably will never be public. So, first and foremost, Synapse is/was neither a #bank nor a #fintech (please stop referring to it as a FinTech). It also was neither #openbanking nor was it #embeddedfinance. All 4 of these designations are unique in #financialservices and Synapse was none of them. It was a company that built a #BaaS platform and marketed the heck out if it. It's value, in its pitch anyway, was to manage relationships between banks and fintechs which can be complex and time consuming. 🤔Is there really a market for such a service? Absolutely, but only if done right. But what most are missing is that it also creates another layer of complexity in your business model that needs to be factored into your #riskmanagement efforts. BaaS service providers and fintechs are third parties. Your #TPRM program should be applied but that is just the beginning. Remember these relationships are extensions of your product and service set and possibly even markets. ALL of that should factor into your #riskprofile. Do your risk and #compliance management programs take this into account? Also, do your contracts with these companies ensure you get what you need when you need it so you can continue to identify and manage #risks? 🧠 Always start with your strategic plan and business objectives. Once you define the business(es) you are in, the products and services you provide, the market, the legal and regulatory requirements, and the operational model to deliver on all this (and then factor in these relationships as extensions of all that), you can effectively identify and manage the entirety of your risks. Also, think of these relationships more as subsidiaries as opposed to just third parties. There are some parts of Reg Y, although not applicable here, that should be considered as potential best practices. 🌍To wrap up, is BaaS dead? No! But BaaS 1.0 may be. There is still a lot of opportunity here and I look forward to a new and improved BaaS 2.0. #regulation #liquidity #regy #ihc

Finally! This is certainly a result of Synapse, while fingers crossed it's a good outcome. As this continues, may they get the guidance right so it actually helps. As we know more we'll certainly share our thoughts at Runway. #fintech #fintechcompliance

Bank-fintech partnerships can provide multiple customer-drawing benefits. And when planned correctly, they can save both customers and financial services organizations from the repercussions of a collapse. Our team helps fintechs and banks perform due diligence and establish more secure strategies for compliant partnerships. Reach out if you'd like to connect with one of us. Story by CNBC #Fintechs #DigitalBanking #BaaS https://bit.ly/4cyHpUI

Making Sense of For Benefit Accounts (FBOs) and Fintech's Future - PYMNTS.com: The recent Synapse bankruptcy represents one of the biggest implosions in the FinTech sector's history. The ongoing mess at the banking-as-a ...

Bank-fintech partnerships can provide multiple customer-drawing benefits. And when planned correctly, they can save both customers and financial services organizations from the repercussions of a collapse. Our specialists help fintechs and banks perform due diligence and establish more secure strategies for compliant partnerships. Reach out if you'd like to connect with one of us. Story by CNBC #Fintechs #DigitalBanking #BaaS https://bit.ly/4cyHpUI

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With Fintech using a lot of key as-a-service solutions you never know what companies you really rely on. I got at least 5 notices of payments delay due to Synapse fiasco. https://lnkd.in/eWmKrsNr

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