Progress made by Banks in Resolving Synapse Issue, Deposits of Fintech Customers Closer to Release

Money | July 11, 2024, 11:03 a.m.

Thousands of Americans have been suffering from frozen fintech accounts for two months. However, there is finally some relief in sight as banks connected to collapsed intermediary Synapse are working on piecing together account information. This progress could potentially lead to the release of funds to stranded customers within weeks. Evolve Bank & Trust and Lineage Bank have made significant headway in the process, aided by hiring a former Synapse engineer to unlock crucial data. With pressure from regulators like the Federal Reserve and the Federal Deposit Insurance Corp., the banks are being urged to release the funds. The situation arose when over 100,000 customers of fintech apps were suddenly locked out of their accounts in May. The recent optimism among key players comes after a prolonged gridlock in a California bankruptcy court due to poor record-keeping and a lack of funds for a forensic analysis. This debacle has highlighted the risks of small banks in the "banking-as-a-service" sector failing to properly manage unregulated partners like Synapse.