Having a dedicated banking partnership can greatly benefit an organization, like having specialized financial support and advice, discounted and, at times, free business tools, access to loans, and other beneficial transactions.
However, like many organizational conflicts that occur, it is common for businesses to get dissatisfied with partnerships.
One such example is the case of Synapse, the fintech giant that is currently looking to switch banking partners.
Synapse has created a reliable platform to enable banks and other fintech-focused companies to manage financial services.
Until recently, the company was working with Evolve Bank and Trust as well as Mercury. Reportedly, Evolve and Mercury cut ties with Synapse while continuing to work directly with each other.
With emerging concerns, conversations became public knowledge through Fintech Business Weekly.
The 9-year-old company Synapse, being a leading ‘Banking as a Service’ company, has empowered netbanks and fintechs by offering them banking services.
Unfortunately, in August of last year, the FDIC-insured Evolve Bank and Trust announced that they would end their business relationship with Synapse.
Given the advantages of “banking as a service’ companies, it should be noted that the industry has always received criticism.
While the “business as a service” model offers advantages like lower upfront costs and scalability, there are also significant potential downsides that businesses must carefully consider.
One major risk is a lack of control by relying on a third-party service provider, companies cede a certain level of control over critical business processes and data.
This vulnerability increases if few viable alternative providers exist, allowing the service firm to raise prices or degrade service levels.
Security and compliance issues represent another concern with these arrangements. Businesses must ensure service providers have robust security measures and stringent data handling protocols that meet all relevant regulatory requirements.
Failure to do so could expose the company to data breaches, non-compliance fines, and other liabilities. Companies may also face business continuity risks if a service provider encounters operational disruptions.
Employee morale can suffer as well when significant portions of a company’s workforce are outsourced service personnel.
This can breed an “us vs. them” mentality that undermines collaboration and teamwork. Cultural disconnects and geographically dispersed teams create additional management challenges.
While compelling benefits exist, the business as a service model also carries noteworthy disadvantages around control, security, compliance, business continuity, and workforce cohesion that prudent companies must carefully evaluate.
Comprehensive risk assessment and diligent provider vetting are critical to mitigating potential pitfalls.
Sankeet Pathak, founder and CEO of Synapse, expressed that many details that went public through the Forbes letter were “never meant for public eyes.”
There has evidently been a debate on who is responsible for the 13 million-dollar deficit in the accounts. Apparently, the organization simply intended to communicate with its banking partner.
Instances of underpayments, rebate revenue withholding, and reconciliation challenges ”should not have occurred”, as Pathak writes.
What’s next for the Synapse Banking Partner
Sanket Pathak writes that not only did the issue impact their partnership with Evolve, but also affected the company’s relationship with other valued Fintech customers.
In a post on ‘Medium’, Pathak expresses that Synapse banking partner intends to actively and productively collaborate to resolve issues.
It is safe to say there have been several public conflicts involving Synapse and Evolve bank. However, it looks as though reconciliation is in progress.
