Another fintech startup, and its customers, has been gravely impacted by the implosion of banking-as-a-service startup Synapse.
Copper Banking, a digital banking service for teens, informed its customers on May 12 that it would be ending bank deposit accounts and debit cards on May 13. In a letter to customers, CEO and co-founder Eddie Behringer revealed that the banking middleware provider they partnered with, Synapse, was shutting down its service “imminently.”
“Despite our prior planning, this event has forced us to close banking accounts much sooner than expected,” he wrote.
Synapse filed for Chapter 11 reorganization bankruptcy on April 22, intending to sell its assets to TabaPay for $9.7 million. However, that deal fell through, and last week, a United States Trustee filed an emergency motion to convert to a Chapter 7 liquidation bankruptcy.
The halt in Copper Banking’s bank accounts and debit cards means some Copper customers lack access to their funds. Behringer noted that the company is working with AMG National Trust Bank and Synapse to promptly return money to customers.
Behringer mentioned that once they realized the TabaPay deal was in jeopardy, they started returning customer funds, so only a small, single-digit percentage of customers did not receive their funds before the service shutdown.
Copper is now planning to launch a white-labeled family banking product later this year in collaboration with “large banks across America.” Behringer told Truth Voices in an interview that he couldn’t yet reveal the names of these banks but indicated that the company had been moving in this direction over the past year, a shift accelerated by Synapse’s collapse.
Copper remains operational, continuing to provide its direct-to-consumer financial education product, Earn, to customers, according to Behringer. Earn pays teens credits for activities such as playing games, taking surveys, scanning receipts, and referring friends. Once users reach a certain threshold of credits, they are compensated in cash (500 credits for $5). This initiative aims to teach kids about finance and generates revenue through partnerships with other institutions.
Behringer noted that the Earn product, which launched less than a year ago, has seen a 160% year-over-year revenue growth and now provides the majority of Copper’s revenue through partnerships with brands seeking feedback on their products. The 30-person company remains intact and is still hiring.
He stated that due to Earn’s strong growth, Copper is “on track to near profitability this year” and, alongside the funds raised from VC rounds, has “well over four years of runway.”
In April 2022, Copper raised $29 million in a Series A funding round led by Fiat Ventures. Since its inception in 2019, the company has raised a total of $42.3 million. Other investors include Panoramic Ventures, Insight Partners, and Invesco Private Capital. At the time, the company said its primary revenue source was interchange fees.
AMG National Trust Bank and Synapse could not be reached for comment at the time of publication. Copper’s customers may not be the only ones affected. At an emergency hearing last week, as reported by Forbes, a U.S. bankruptcy court judge described Synapse’s troubles as “a situation where tens of millions of people do not have access to potentially hundreds of millions of dollars of their deposits.”
Fintech Business Weekly’s Jason Mikula reported after Friday’s bankruptcy hearing that numerous end users of fintech services, unable to access their funds, shared the devastating impact it has had on their lives with the court and the hundreds of attendees listening in on the hearing.
Copper’s challenges may be indicative of a larger trend of consumer fintechs pivoting to B2B. Earlier this year, Truth Voices reported that Miami-based Onyx Private, a Y Combinator-backed digital bank that offered banking and investment services to high-earning millennials and Gen Zers, had also ceased its consumer bank operations. Onyx noted at the time that it would transition to a “B2B white-label platform-as-a-service model for community banks, regional banks, and credit unions” looking to launch digital apps targeting affluent young consumers.
