Fintech
The young fintech Copper had to emergency discontinue its banking and debt products
Another fintech startup, and its customers, have been severely affected by the crisis implosion of banking-as-a-service startup Synapse.
Copper Banking, a digital banking service aimed at teens, informed its customers on May 12 that it would 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 the previous week that the banking middleware provider they use, Synapse, would cease its service “imminently.”
“Despite our advance planning, this event 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 U.S. trustee filed an emergency motion asking the judge to move to a Chapter 7 bankruptcy liquidation.
The closure of Copper Banking’s bank accounts and debit cards means that some Copper customers do not have access to their funds. Behringer says it is working with its banking partners, AMG National Trust Bank and Synapse, to return their money as soon as possible.
Behringer said that as soon as it heard the news that the TabaPay deal was in jeopardy, it began returning customer funds, so only a small number of single-digit customers did not receive their funds before the service was discontinued .
Copper now plans to offer a white-labeled family banking product later this year in partnership with “big banks across America,” which Behringer told TechCrunch in an interview that he hasn’t gotten around to yet to name. The company had been planning to move in that direction for the past year, he added, but the process was accelerated due to Synapse’s shutdown.
According to Behringer, Copper remains operational providing customers with its direct-to-consumer financial education product, Earn. Earn teen credits for playing games, taking surveys, scanning receipts, inviting friends, and once users reach a certain threshold of credits, they get paid cash (500 credits for $5), she says. The goal is to teach children about finance. Earn money through collaboration with other institutions.
That product, he said, launched just under a year ago and has seen 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 says that because Earn’s growth is so strong, Copper is still “on track to reach near profitability this year” and, in addition to the money raised from 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 interchange fees.
AMG National Trust Bank and Synapse could not be reached for comment at the time of publication. As it turns out, Copper customers may not be alone. In an emergency hearing last week, as reported by Forbesa US bankruptcy court 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 of their deposits.”
And Jason Mikula of Fintech Business Weekly reported After Friday’s bankruptcy hearing, “numerous fintech end users who have had their ability to access their funds frozen have shared the devastating impact it has had on their lives with the court and hundreds of participants who have connected to the hearing”.
The copper problems could be another example of a trend that sees consumer fintech moving towards B2B. Earlier this year, TechCrunch reported that Miami-based Private onyxa Y Combinator-backed digital bank that provided banking and investment services to high-income Millennials and Generation Z, also had has ended its consumer banking operations. He said at the time that he would move toward a “white-label B2B platform-as-a-service model for community banks, regional banks and credit unions” that want to launch digital apps built for young, affluent consumers.
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