Fintech

The failure of Synapse is no one’s responsibility and everyone’s problem

Published

7 months ago

25 June, 2024

The failure of Synapse is no one's responsibility and everyone's problem

From left: Michael Barr, vice president for oversight at the Federal Reserve; Martin Gruenberg, president of the Federal Deposit Insurance Corp.; and Michael Hsu, acting director of the Office of the Comptroller of the Currency, were sworn in during a House Financial Services Committee oversight hearing in May. The failure of fintech middleware company Synapse has left thousands of customers unable to access their funds, and regulators have so far said little about their plans to address the problem, or the limitations that stand in the way.

Bloomberg News

It wasn’t long after I started dating the woman who would become my wife that I decided she was the one for me. She was (and is) beautiful, interesting, and much smarter than me, and I decided that if things didn’t work out it wouldn’t be because I didn’t know how I felt about her or what I wanted our future to be. To be.

So I started saving for an engagement ring, but to do so I first had to get out of modest credit card debt, moving the goalposts a little further. More importantly, I had to develop the habit of saving my money, which I did Very gradually over the course of about four years. When I finally proposed to her, I was obviously thrilled that she said yes. But I was also proud of myself for setting a financial goal and achieving it—it made me feel like I’d proven something to myself as we continued our journey together.

When I read Claire Williams’ story about fintech customers who can’t access their savings due to bankruptcy from fintech middleware company Synapse, I was transported back to that time when I was struggling to save just a little here and there and how precious that nest egg was to me – and what it represented. So it wasn’t difficult to feel the frustration that those customers must feel for having done something difficult only to be disappointed by some bureaucratic hitch that no one seems able to explain or resolve.

American Banker readers perhaps know better than most what deposit insurance is and how it works, so let me spoil you while I recap: Deposits at a bank – located in checking or savings accounts – are federally insured until $250,000 per account. That The policy was adopted during the Great Depression, but was still hard-won – the government decided that people did not need to worry about whether their banks were solvent or not, because they had recently discovered that concerns about a bank’s solvency were a proximate cause of actual bank insolvency.

Fintechs, meanwhile, are not banks and do not accept deposits and are therefore not insured. But they often serve as a customer-facing business can help people achieve their financial goals by helping them build their credit and manage their money and get used to saving. But the back-end deposit-taking capabilities are handled by banks, which offer that service for a fee – what has become known as banking as a service, or BaaS. Regulators have lately they have become more scathing in their criticism of bank-fintech partnershipsIncluded issue a cease-and-desist order against Evolve Bank, one of Synapse’s partner banks — requiring them to improve third-party risk controls and prohibiting the bank from entering into new fintech partnerships without regulatory approval.

It may seem like too little, too late, and for customers whose money is in limbo, it probably is. But it is also a reflection of the limited actions banking regulators can take against nonbanks, at least in the short term. One might compare the extraordinary actions taken by regulators after last year’s bank failures unfavorably with the tepid response to Synapse’s collapse, but regulators simply don’t have the same tools to intervene in the latter case — and even if they did, they probably they would not want to set a precedent whereby failed fintechs get bailouts or special treatment. So, for fintech customers caught up in Synapse’s collapse, the ball is unfortunately in the bankruptcy court, meaning resolution will likely be exasperatingly slow.

But there are things regulators can still do to fill the gaps that led to this fiasco, on the one hand and let customers know that regulators feel their pain on the other.

Regarding the first point, regulators have been doing small things to address this problem for some time. Apart from the aforementioned enforcement actions taken against banks for supervisory deficiencies in their fintech partnerships, the The Federal Deposit Insurance Corp. has been increasingly diligent in enforcing its rules on the representation of deposit insurance AND reporting the rules of the road for such representation by fintechs in recent years. The Consumer Financial Protection Bureau, which has a broader mandate than other banking regulators, may also have a role to play if fintechs’ deposit insurance claims constitute an unfair, deceptive and abusive practice.

But on that last point, what has been missing – at least so far – is some sort of recognition from the people in power that Synapse’s failure highlights a gap and they are on the case. Ordinary people – unlike the extraordinary readers of American Banker – have in many cases decided to do business with fintechs with the knowledge that their money would be as safe with them as it would be with a bank, and this has proven not to be the case. necessarily be TRUE.

People trust the financial system more than they understand it, and that’s by design: the whole reason we have deposit insurance in the first place is so people can live their lives assuming that their money they will not disappear. Synapse’s failure shatters that trust, and that’s a problem that needs to be resolved quickly, particularly for those who are already on the periphery of the financial system and to whom fintechs often sell themselves.

Whatever happens from a regulatory or enforcement perspective – or legislative, for that matter – will take time. But there are thousands of people out there right now whose money has actually disappeared and who feel like no one sees them or doesn’t care. This is an experience that could worsen the future of their financial and banking relationships, unless they get the message that help is on the way.

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We are the editorial team of FinCrypto, where seriousness meets clarity in cryptocurrency analysis. With a robust team of finance and blockchain technology experts, we are dedicated to meticulously exploring complex crypto markets with detailed assessments and an unbiased approach. Our mission is to democratize access to knowledge of emerging financial technologies, ensuring they are understandable and accessible to all. In every article on FinCrypto, we strive to provide content that not only educates, but also empowers our readers, facilitating their integration into the financial digital age.

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Fintech

Lloyds and Nationwide invest in Scottish fintech AI Aveni

Published

6 months ago

29 July, 2024

FinCrypto Staff

Lloyds and Nationwide invest in Scottish AI fintech Aveni

Lloyds Banking Group and Nationwide have joined an £11m Series A funding round in Scottish artificial intelligence fintech Aveni.

The investment is led by Puma Private Equity with additional participation from Par Equity.

Aveni creates AI products specifically designed to streamline workflows in the financial services industry by analyzing documents and meetings across a range of operational functions, with a focus on financial advisory services and consumer compliance.

The cash injection will help fund the development of a new product, FinLLM, a large-scale language model created specifically for the financial sector in partnership with Lloyds and Nationwide.

Joseph Twigg, CEO of Aveni, explains: “The financial services industry doesn’t need AI models that can quote Shakespeare, it needs AI models that offer transparency, trust and, most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, vetted by financial services experts for specific financial services use cases.

“FinLLM’s goal is to set a new standard for the controlled, responsible and ethical adoption of generative AI, outperforming all other generic models in our selected financial services use cases.”

Robin Scher, head of fintech investment at Lloyds Banking Group, says the development programme offers a “massive opportunity” for the financial services industry by streamlining operations and improving customer experience.

“We look forward to supporting Aveni’s growth as we invest in their vision of developing FinLLM together with partners. Our collaboration aims to establish Aveni as a forerunner in AI adoption in the industry, while maintaining a focus on responsible use and customer centricity,” he said.

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Fintech

Fairexpay: Risk consultancy White Matter Advisory acquires 90% stake in fintech Fairexpay

Published

6 months ago

29 July, 2024

FinCrypto Staff

Treasury Risk Consulting Firm White Matter Alert On Monday he announced the acquisition of a 90% stake in the fintech startup Fair payment for an undisclosed amount. The acquisition will help White Matter Advisory expand its portfolio in the area of cross-border remittance and fundraising services, a statement said. White Matter Advisory, which operates under the name SaveDesk (White Matter Advisory India Pvt Ltd), is engaged in the treasury risk advisory business. It oversees funds under management (FUM) totaling $8 billion, offering advisory services to a wide range of clients.

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White Matter Advisory, based in Bangalore, helps companies navigate the complexities of treasury and risk management.

Fairexpay, authorised by the Reserve Bank of India (RBI) under Cohort 2 of the Liberalised Remittance Scheme (LRS) Regulatory Sandbox, boasts features such as best-in-class exchange rates, 24-hour processing times and full security compliance.

“With this acquisition, White Matter Advisory will leverage Fairexpay’s advanced technology platform and regulatory approvals to enhance its services to its clients,” the release reads.

The integration of Fairexpay’s capabilities should provide White Matter Advisory with a competitive advantage in the cross-border remittance and fundraising market, he added.

The release also states that by integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

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Fintech

Rakuten Delays FinTech Business Reorganization to 2025

Published

6 months ago

29 July, 2024

FinCrypto Staff

Rakuten (Japan:4755) has released an update.

Rakuten Group, Inc. and Rakuten Bank, Ltd. announced a delay in the reorganization of Rakuten’s FinTech Business, moving the target date from October 2024 to January 2025. The delay is to allow for a more comprehensive review, taking into account regulatory, shareholder interests and the group’s optimal structure for growth. There are no anticipated changes to Rakuten Bank’s reorganization objectives, structure or listing status outside of the revised timeline.

For more insights on JP:4755 stock, check out TipRanks Stock Analysis Page.

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Fintech

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

Published

6 months ago

29 July, 2024

FinCrypto Staff

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

You are reading Entrepreneur India, an international franchise of Entrepreneur Media.

White Matter Advisory, which operates under the name SaveDesk in India, has announced that it is acquiring a 90% stake in fintech startup Fairexpay for an undisclosed amount.

This strategic move aims to strengthen White Matter Advisory’s portfolio in cross-border remittance and fundraising services.

By integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

White Matter Advisory, known for its treasury risk advisory services, manages funds under management (FUM) totaling USD 8 billion.

Founded by Bhaskar Saravana, Saurabh Jain, Kranthi Reddy and Piuesh Daga, White Matter Advisory helps companies effectively manage the complexities of treasury and risk management.

The SaveDesk platform offering includes a SaaS-based FX market data platform with real-time feeds for over 100 currencies, bank cost optimization services, customized treasury risk management solutions, and compliance guidance for the Foreign Exchange Management Act (FEMA) and other trade regulations.

Fairexpay is a global aggregation platform offering competitive currency exchange rates from numerous exchange partners worldwide. Catering to both private and corporate customers, Fairexpay provides seamless money transfer solutions for education, travel and immigration, as well as simplifying cross-border payments via API and white-label solutions for businesses. Key features include competitive currency exchange rates, 24-hour processing times, extensive currency coverage of over 30 currencies in more than 200 countries, and secure, RBI-compliant transactions.

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