Juliana Derr’s Post

New Signals: Synapse wasn't your typical BaaS Synapse’s bankruptcy and subsequent wind-down has left many open questions about the path forward for its ~100 customers and tens of thousands of end users holding funds on the platform. It has also brought to light the complexities and risks involved in building Banking as a Service, and underscored the human cost of getting it wrong.  In the fallout of this collapse it’s important to learn from the vulnerabilities that led to this point. It’s also important to acknowledge the unique challenges that Synapse grappled with– in its bank partnership structure, its struggles with regulatory compliance, and seeming inability to maintain an accurate ledger. Big thank you to contributors Sophie Vo and Stephanie Mertz for your writing, and to Simon Taylor, Faraz Rana, Trevor N. Tanifum and Alex Johnson for weighing in! via This Week in Fintech: https://lnkd.in/eehFQh_4

Synapse's recent bankruptcy, which froze over $100 million in customer funds, has sent shockwaves through the fintech sector. Learn what this means for the industry and why verifiable distributed trust is crucial for innovation and security in our latest blog. John Wolpert, a thought leader in multi-party coordination shared the Synapse story with us. The Baseline Protocol is using a banking data synchronization use case for their interoperability demonstration, which aims to resolve issues like those faced by Synapse. https://lnkd.in/g8sn6KTm Andreas Freund, PhD, Mark Rymsza, Sonal Patel #FinTech #banking #news #bankruptcy #DataSharing #data #technology #business #finance #decentralization #security #privacy #innovation

The Baseline Protocol interoperability use case will alleviate issues like what Synapse faced by synchronizing banking data in real time. Read more about what happened and how multi-party coordination will change the landscape of data sharing.

𝗦𝘆𝗻𝗮𝗽𝘀𝗲’𝘀 𝗯𝗮𝗻𝗸𝗿𝘂𝗽𝘁𝗰𝘆 - 𝘁𝗵𝗲 $𝟴𝟱𝗺 𝘄𝗮𝗸𝗲-𝘂𝗽 𝗰𝗮𝗹𝗹 𝗳𝗼𝗿 𝗳𝗶𝗻𝘁𝗲𝗰𝗵 What happens when the backbone of #fintech partnerships falters? The abrupt #bankruptcy of Synapse Financial Technologies has left $85 million in limbo, exposed regulatory blind spots, and disrupted over 200,000 accounts. This isn’t just a one-off incident—it’s a critical moment for the Banking-as-a-Service (#BaaS) model. From #fund transparency to accountability gaps, Synapse’s story raises questions about how fintechs and #banks can work together more securely. What went wrong, and what needs to change to prevent this from happening again? 👉 Dive into the full analysis to uncover the #lessons for fintech-bank collaborations and the future of BaaS. https://lnkd.in/etQP9dzj #Fintech #BankingAsAService #Innovation #Compliance #FutureOfFinance

The recent collapse of Synapse highlights a troubling phenomenon: Many cutting-edge fintech companies, which bring much-needed disruption to a sector that has stagnated for decades, still lack the essential infrastructure to effectively reconcile transactions, track funds, and maintain visibility into their ledgers. Yuval Teller Hasson, Ledge's Director of Business Operations, shares more on Accounting Today about the prevalence of this problem and why businesses urgently need to invest in technology and automated processes. Check it out here 👇

𝙎𝙮𝙣𝙖𝙥𝙨𝙚 𝘾𝙤𝙡𝙡𝙖𝙥𝙨𝙚 𝙍𝙖𝙞𝙨𝙚𝙨 𝙌𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨 𝘼𝙗𝙤𝙪𝙩 𝙖 𝙃𝙤𝙩 𝙁𝙞𝙣𝙩𝙚𝙘𝙝 𝘽𝙪𝙨𝙞𝙣𝙚𝙨𝙨 𝙈𝙤𝙙𝙚𝙡 Over the past decade, numerous fintech companies have partnered with small and midsize banks to create innovative apps, offering new services while banks manage the deposits. This collaboration, backed by the Federal Deposit Insurance Corporation (FDIC), aimed to revolutionize banking. However, Synapse Financial Technologies, Inc.'s collapse has revealed flaws in this model. Synapse's poor recordkeeping left $96 million in deposits frozen, exposing a key issue: FDIC insurance covers banks, not fintechs. This has raised concerns about the safety of deposits managed by fintech intermediaries. Regulators are scrutinizing these partnerships. Michael Barr, the Federal Reserve Board’s vice chair, emphasized banks' responsibility to manage risks in fintech collaborations. Fed Chair Jerome Powell highlighted regulatory limitations, noting that while the Fed supervises banks, it doesn't oversee fintechs like Synapse. The fallout primarily affected Synapse's partners, such as Evolve Bank & Trust, which has faced enforcement actions for its risk management practices. Despite Evolve's steps to mitigate the impact, including winding down its business with Synapse, the incident has underscored the fragility of fintech partnerships. Prominent fintechs like Juno and Yotta, which target niche markets such as crypto traders and gamified savings, respectively, have shaken consumer confidence. Despite assurances from successful fintechs like Chime and Current, the collapse has spotlighted vulnerabilities and the need for clearer consumer protections. Industry experts call for better regulatory frameworks to manage fintech-bank relationships. The Synapse case highlights the necessity for consumers to understand the nuances of FDIC insurance and the inherent risks in fintech services. As the fintech sector evolves, balancing innovation with security remains a critical challenge. #Fintech #Banking #FDIC #FinancialServices #Innovation #Regulation #ConsumerProtection #Finance #SynapseCollapse #BankingModel https://lnkd.in/dntG3P7t

The bankruptcy of Synapse, where $100 million of customer funds is missing, raises serious concerns about bank-fintech partnerships and the need for rigorous due diligence. This situation underscores the immediate need for banks to reassess their partnerships and prioritize consumer protection. Stricter regulations and enhanced oversight could become the norm, ensuring only fintechs that can withstand scrutiny will thrive in the financial ecosystem. #Fintech #AI

More than 350 community banks and credit unions count on Edge One for financial technology that helps them operate more efficiently and create great experiences for members. We strive to be a knowledgeable and dependable #fintech partner you can trust. No mad scientists here! But what if you had to pick a mad scientist? 🧠 #banking #atm #AWS #cloudbanking #cloudtechnology #creditunions #banks

Some sort of shared ledger validity audit? That would definitely make some sense. Conceptually simple: export data from both/all parties and reconcile. Obviously in practice non-trivial but probably a good exercise at about an annual cadence by third party review as a check on drift.

As bank-fintech partnerships continue to shape the #financialservices landscape, how can we make this system safer and better? Our new three-part series dives deep into this critical question, starting with an analysis of the Synapse bankruptcy and its implications for the industry. #fintech #banking In Part 1, we explore: ◾ The structural flaws revealed by Synapse's collapse ◾ Why the term "FBO account" is outdated and misleading ◾ The urgent need for industry standards over new regulations Read the full article here and stay tuned for Parts 2 and 3: https://lnkd.in/ee8Fhbci