Synapse

Synapse (also referenced as Synapse Financial Technologies and formerly branded SynapseFi) was a San Francisco-based banking-as-a-service company founded in 2014 by Sankaet Pathak. It operated a platform and set of APIs that let other companies — primarily fintechs — embed banking services into their own products, acting as an intermediary connecting fintech firms with chartered banks. Reported use cases spanned neobanking, lending and credit, wealth management, payments, instant payment features for payroll software serving 1099 contractor-heavy businesses, and specialized credit and debit card programs.

The company raised just over $50 million in venture capital across its life, including a $33 million Series B in 2019 led by Angela Strange of Andreessen Horowitz. After layoffs in 2023 and the breakdown of its relationships with banking partner Evolve Bank & Trust and client Mercury, Synapse filed for Chapter 11 bankruptcy in April 2024. A proposed $9.7 million sale of its assets to instant payments company TabaPay was abandoned in May 2024, and a U.S. trustee moved to convert the case to a Chapter 7 liquidation. The collapse left roughly $158.6 million in end-user deposits frozen as of July 2024, with an estimated $65 million to $95 million in customer funds unaccounted for; as many as 100 fintechs and up to 10 million end customers were potentially affected. A bankruptcy trustee, Jelena McWilliams, continued in August 2024 to work with Synapse, Evolve Bank & Trust, Lineage Bank, American Bank and AMG National Trust to reconcile ledgers and return customer funds.

Founding story

Sankaet Pathak moved from Rajasthan, India to Memphis, Tennessee to attend the University of Memphis, where he studied computer engineering, physics and mathematics and completed a master's in electrical engineering, with academic work focused on the solar corona. As a recent immigrant and student he found it difficult to open a bank account without traditional U.S. forms of identification, and every interaction with his local bank — account opening, receiving payments, obtaining a debit card — was an in-person process. Motivated by that experience and by the more than 20% of U.S. adults with poor or limited credit history, he started Synapse to help companies build banks and financial services and to offer an alternative to legacy banking systems.

Business model

Synapse sold infrastructure to other companies: it provided APIs and a regulated framework with bank connectivity so that fintechs and other businesses could launch white-labeled financial products without building the technology or navigating bank regulation themselves. The model depended on partnerships with sponsor banks, notably Evolve Bank & Trust, which the founder later cited as a structural weakness — a company too reliant on one or two partners.

Not specified in the sources.

Traction

At its peak the platform's failure implicated as many as 100 fintechs and up to 10 million end customers, per Synapse's own bankruptcy filings. Headcount context is available only through layoff disclosures: an 18% reduction in mid-2023 and 86 employees (about 40%) in October 2023, described elsewhere as cuts affecting nearly 60% of the workforce during 2023.

Latest developments

As of August 2024, Synapse remained in bankruptcy with a trustee attempting to reconcile ledgers across multiple partner banks and return customer money; TechCrunch noted the case had not yet converted to Chapter 7. Founder Sankaet Pathak, who left the CEO role in May 2024, publicly blamed Evolve Bank & Trust for deposit shortfalls in an August 20, 2024 post and raised $11 million in pre-seed funding from Tribe Capital and angels for a separate humanoid robotics startup, Foundation, co-founded with Tribe's Arjun Sethi. In a later podcast interview Pathak said 'Synapse died because of the Evolve issue.'