Another fintech startup and its customers were hit hard by the implosion of banking-as-a-service startup Synapse.
Copper bankingdigital banking service aimed at teenagers, notified its customers on May 12 that it will stop selling deposit accounts and debit cards on May 13. In a letter to customers, CEO and co-founder Eddie Behringer said the company learned last week that banking middleware provider Synapse “immediately” discontinued services.
“Despite our previous plans, this event forced us to close our bank accounts much earlier than we expected,” he wrote.
Synapse filed for Chapter 11 bankruptcy reorganization on April 22, with plans to sell its assets to TabaPay for $9.7 million. That sale fell through, nevertheless, and last week the United States Trustee filed an emergency motion asking a judge to move the company to Chapter 7 bankruptcy liquidation.
The closure of Copper Banking bank accounts and debit cards signifies that some Copper customers cannot access their funds. Behringer says it is working with its banking partners, AMG National Trust Bank and Synapse, to refund customers as quickly as possible.
Behringer said that as soon because it heard the news that the TabaPay transaction was at risk, it began refunding customers, so only a small, single-digit percentage of consumers didn’t receive their funds before the service was shut down.
Copper currently plans to offer a white-label family banking product later this yr in partnership with “large banks across America,” Behringer told TechCrunch in an interview he couldn’t yet name. He added that the company had been planning to move in this direction for the past yr, but the process was accelerated due to the death of Synapse.
According to Behringer, Copper continues to operate by providing customers with its direct-to-consumer financial education product Earn. Earn teen credits to play games, complete surveys, scan receipts and refer friends; It is said that once users reach a certain threshold of credits, they may receive money for them (500 credits for $5). The goal is to teach children about funds. It earns money by cooperating with other institutions.
The product, he said, was launched lower than a yr ago and has seen 160% year-over-year revenue growth. Since then, it has provided “the majority” of Copper’s revenue as the company makes money through partnerships with brands that want feedback on their products. Behringer said the 30-employee company stays intact and continues to employ.
He says that because Earn is growing so strongly, Copper is still “on track to achieve near-profitability this year,” and in addition to money raised from VC fundraising, it has “well over four years of experience.”
In April 2022 Copper raised $29 million in a Series A financing round led by Fiat Ventures. Since its inception in 2019, a total of $42.3 million has been raised. Other backers include Panoramic Ventures, Insight Partners and Invesco Private Capital. At that point, the company claimed that it derived its revenues mainly from interchange fees.
AMG National Trust Bank and Synapse couldn’t be reached for comment at the time of publication. Apparently, Copper’s customers is probably not alone. As reported during an emergency hearing last week ForbesA U.S. bankruptcy court judge described Synapse’s troubles as “a situation in which tens of millions of people are unable to access potentially hundreds of millions of dollars of their deposits.”
And Jason Mikula from Fintech Business Weekly reported following Friday’s bankruptcy hearing, “Many fintech end-users who had their access to their funds frozen shared with the court the devastating impact it has had on their lives, and hundreds of participants attended the hearing.”
Copper problems could also be one other example of the trend of consumer fintechs moving to B2B. Earlier this yr, TechCrunch reported that Miami-based Onyx Private, a Y Combinator-backed digital bank that gives banking and investment services to high-earning millennials and Gen Z, also exited its consumer banking business. It said at the time that it will move to a “white-label B2B platform-as-a-service model” for community banks, regional banks and credit unions that want to launch digital applications built for young affluent consumers.