Another fintech startup, and its customers, have been hit hard by the collapse of banking-as-a-service startup Synapse.
Copper bankinga digital banking service aimed at teenagers, notified its customers on May 12 that it will discontinue bank deposit accounts and debit cards on May 13. In a letter to customers, CEO and co-founder Eddie Behringer said the company had learned last week that the banking middleware provider they used, Synapse, was sunsetting its service “imminent.”
“Despite our previous planning, this event has forced us to close bank accounts much earlier than expected,” he wrote.
Synapse filed for Chapter 11 bankruptcy on April 22 with plans to sell its assets to TabaPay for $9.7 million. But that sale fell through, and last week a United States trustee filed an emergency petition asking a judge to convert to a Chapter 7 liquidation bankruptcy.
The suspension of Copper Banking bank accounts and debit cards means that some Copper customers are unable to access their funds. Behringer says it is working with its banking partners, AMG National Trust Bank and Synapse, to refund customers as soon as possible.
Behringer said that once it heard the news that the TabaPay deal was in jeopardy, it began returning customer funds, so only a small, single-digit percentage of its customers did not receive their money before the service was shut down.
Copper now has plans to offer a white-label family banking product later this year in partnership with “major banks across America,” Behringer told TechCrunch in an interview he could not yet name. The company had been planning to move in that direction for the past year, he added, but the process was accelerated by the collapse of Synapse.
Copper remains in business, providing its direct-to-consumer financial education product, Earn, to clients, according to Behringer. Earn credits for teens to play games, take surveys, scan receipts and refer friends. Once users reach a certain limit of credits, they are paid in cash for them (500 credits for $5), he says. The goal is for kids to learn about finances. He earns money through it by partnering with other institutions.
That product, he said, was launched just under a year ago and saw revenue growth of 160% year over year. It has since provided the “majority” of Copper’s revenue, as the company makes money through partnerships with brands that want feedback on their products. The 30-person company remains intact, Behringer said, and is still hiring.
He claims that because Earn’s growth is so strong, Copper is still “on track to near profitability this year” and, in addition to the cash it raised from the VC fundraising, has “well over four years of runway.”
In April 2022, Copper raised $29 million in a Series A funding round led by Fiat Ventures. It has raised a total of $42.3 million since its inception in 2019. Other backers include Panoramic Ventures, Insight Partners and Invesco Private Capital. At the time, the company said it derived its revenue primarily from interbank fees.
AMG National Trust Bank and Synapse could not be reached for comment at the time of publication. Apparently, Copper’s customers may not be alone. In an emergency hearing last week, as reported by Forbesa US bankruptcy judge described Synapse’s problems as “a situation where tens of millions of people don’t have access to potentially hundreds of millions of dollars in their deposits.”
And Jason Mikula of Fintech Business Weekly mentionted after Friday’s bankruptcy hearing, “Many fintech end users who had frozen access to their funds shared the devastating impact it had on their lives with the court and the hundreds of attendees invited to the hearing.”
Copper’s troubles may be another example of a trend of consumer fintech shifting towards B2B. Earlier this year, TechCrunch reported that Miami-based Onyx Private, a Y Combinator-backed digital bank that provided banking and investment services to high-earning millennials and Gen Zers, had also ended its consumer banking operations. . It said at the time that it would shift to a “white-label B2B platform-as-a-service model for community banks, regional banks and credit unions” looking to launch digital apps built for young affluent consumers.
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