Re:(FinTech) Synapse has collapsed, 10M consumers, 100s of f...
by helsinkiandrew on Sunday May 26, 2024 @05:57AM
(#40480931)
> The issue seems to be Synapse's lack of operating capital which means all the "middleware" will functionally stop working.
The only example I can think of how a regulator can stop this is the Lehman bankruptcy. When Lehman went under the U.K. branch was left with zero dollars - nothing to pay staff, rent, or power. The Bank of England sent a £1M within hours to keep the lights on, so the administrators could be appointed and start winding down the assets.
Re:(FinTech) Synapse has collapsed, 10M consumers, 100s of f...
by alephnerd on Sunday May 26, 2024 @06:29AM
(#40481066)
Given Synapse's relatively small size, there will most likely be a negotiated acquisition by one of the bigger and Basel II compliant players.
This is what was done with SVB, First Republic, Signature, and Silvergate.
The main reason fintechs were so nimble was because they would sidestep federal regulators by being state-chartered banks.
I am in agreement with you that stare regulators need to also be stricter.
We'll probably see state regulators increasingly adopt Basel II and force stricter compliance on state entities this coming decade.
Another loophole they often would try is partner with a couple local banks to use as their underlying foundation, and build most of their functionality on top of that.
This is what Synapse did [0], and why their underlying banking infra is backed by Evolve Bank & Trust in Tennessee, who provide their underlying banking infra to plenty of other A16Z funded fintechs. They are a member of the Federal Reserve so I wouldn't be worried about your deposits per say.
The issue seems to be Synapse's lack of operating capital which means all the "middleware" will functionally stop working.
[0] - https://synapsefi.com/legal