The how about Financial Tech and Outsourced Banking, a way of US Fintech which unfortunaltely hung the monent the software company Synapse went bancrupt, some WinYotta app users lost access to money in their FDIC-insured bank accounts. Still how the Start up was set up is one of a kind for the time being. The idea was simple but only possibe due to being well connected: A lot of Americans struggle to form a savings habit, still they also love spending money playing the lottery. Innicial beginning was favoured by covid as 2020 was also the year Covid-19 hit us. As people were stuck at home, with more time to spend on games and to scour social media for moneymaking ideas. Yotta also gave away equity to online influencers.Yotta Technologies Inc. received investments from some VC firms such as Base10 Partners and Core Innovation Capital, plus hedge fund manager Cliff Asness and Adam Moelis’ father, Ken, the billionaire founder of the investment bank Moelis & Co..
In the first two months of Yotta’s, about 6,500 customers deposited arouhd $40 million, so the company distributed $125,000 worth of winnings. These kind of companies are quite inique, the forerunners of future fintech. “Gamifying” everything is a hot idea not only in tech circles. Addicioanlly behavioral finance—the idea that you can harness people’s emotional urges to support making people take better decisions. And then San Francisco-based Synapse went bankrupt, leaving behind a tangled mess of records and a shortfall of funds of as much as $95 million. No one was sure who owed what to whom or how to account for the apparently missing money. There are financial technology companies and neobanks, they work directly with banks and avoid middlemen like Synapse. But keeping track of deposits, withdrawals, debit card purchases, fees, rebates and interest payments requires a lot of technical infrastructure, and banks often aren’t willing to make that investment for smaller startups.
The company Synapse filed for Chapter 11 bankruptcy protection in April 2024 and had to shut down its services to some of its fintech or bank partners, including Evolve Bank & Trust. Which also works with Yotta. That had caused disruptions for customers of Synapse’s partners, leading to accounts being frozen or showing funds not existing at all.
💪 In 2020 Yotta, Synapse and Evolve were part of a new financial ecosystem— a kind of zippy apps to draw in consumers, regulated banks to hold the money and software to manage it all. New ideas often bring new risks, but the stakes are higher when you’re dealing with bank deposits instead of, say, online razor blade subscriptions. “This is true financial infrastructure,” says Logan Allin, a financial technology investor and founder of Fin Capital, who says he twice passed on pitches to invest in Synapse. “There’s no margin for error in that type of scenario.”
💪 The founder of Synapse: Pathak was another young entrepreneur. He knew about his frustrating experiences trying to open a bank account after immigrating from India to study at the University of Memphis. By providing the technology to connect innovative startups with the banking system, Synapse could open doors for the customers big banks were ignoring. Synapse and Evolve forged a relationship in 2017. The bank’s then-chairman, Scot Lenoir, is also a Memphis alum. “A lot of that credit goes to Sankaet in terms of pushing us towards the fintech space,” Lenoir said in an online panel discussion with Pathak in 2021. In 2019, Synapse got a $33 million round of VC funding led by Andreessen Horowitz.
SourceAngela Strange, a former Synapse’s board member until autumn of 2023, predicted in a blog post the way financial products could quickly evolve with “Lego-like blocks” of software from different specialized companies. Source Â
Angela Strange further wrote that Synapse in a 2019 speech in which she predicted that “in the not too distant future, nearly every company will be a financial-services company.” Businesses with new ideas for money apps could just hire a software company instead of waiting to get their own banking license. The result? “Everyone, no matter their socioeconomic demographic, no matter where they live in the world, will have access to affordable financial services—and we might even love them,” said Strange, who declined to comment for this story.
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