Hi, fintech fam! 💜

Things are heating up, and I’m thrilled to share what the Fintech Is Femme team has planned.

First, our next big Fintech Is Femme Summit is on September 9. Mark your calendars because you won’t want to miss it. We’ll gather the community in person for another epic conference filled with networking, education, and coaching.

But that’s not all—many fun and informative events are coming up, including the launch party for my new book, Fintech Feminists.

Be sure you're subscribed to the Fintech Is Femme event page so you don't miss a thing!

And hey, while you’re at it, why not move me to your primary inbox and keep me out of those annoying spam and promotion folders? That way, you'll stay updated on all the exciting happenings!

Now, let’s get into one of the biggest news stories in the fintech world.

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IMPACT

Synapse Collapse Exposes Fintech’s False Promises, But There’s Hope For Fulfillment

Fintech startups have long been heralded as the vanguard of a new financial era. They promise to democratize access to banking, credit, and investment opportunities—a vision so compelling that it drew me into the industry as a young reporter many years ago. 

Yet, too often, these companies make headlines for the wrong reasons—consumers losing hard-earned money due to deceptive or unregulated practices at the hands of unchecked leadership.

When will most of the fintech industry focus on uplifting financially vulnerable consumers rather than exploiting them? The solution lies in two crucial changes: implementing stricter regulations and diversifying the founders who drive the next wave of startup innovation.

Time and again, we've seen vast sums of money—another $10 million here, another $350 million there—poured into the hands of founders who, despite clear red flags, end up bankrupting their companies and leaving thousands of consumers high and dry. The recent collapse of Synapse is a case in point, where mismanagement led to financial ruin for many.

Synapse Financial Technologies, an early pioneer in the Banking as a Service (BaaS) model, filed for Chapter 11 bankruptcy in April. This San Francisco-based company acted as a middleman between fintech companies and FDIC-backed banks, allowing companies to embed banking services into their offerings.

With contracts with 20 banks and 100 fintech companies, Synapse had about 10 million end users. Its bankruptcy broke a key link in the chain that connects users of popular finance apps to their money, leaving 100,000 people without access to some $265 million.

Payments company TabaPay initially agreed to acquire Synapse but backed out of the deal a couple of weeks later. This left fintech companies like teen banking startup Copper without access to deposited funds, affecting countless families. Other companies such as Yieldstreet, Juno, and Yotta were similarly impacted. 

At the center of the Synapse meltdown lies Arkansas-based Evolve Bank & Trust, a small regional lender whose accounts were offered through fintech apps like Yieldstreet and Yotta. 

Customers interacted with these apps, trusting them with their money, which Evolve technically held. Meanwhile, Synapse operated in the background, ostensibly tracking the flow of funds, creating an intricate web that ultimately unraveled, leaving countless consumers in financial limbo.

In May, courtroom finger-pointing between Synapse and Evolve Bank & Trust failed to clarify the situation. Synapse claimed Evolve owed end users $50 million in deposits, while Evolve questioned the accuracy of Synapse's ledgers. 

Meanwhile, consumer accounts remained frozen, and the former CEO of Synapse, Sankaet Pathak, reportedly raised $10 million for his next startup in June. This is the same founder who was sued in 2019 by three women for verbal abuse and antagonism.

When will we learn that investing (and reinvesting) in such founders will lead only to the industry's demise, not its future? Trust is already eroded. By July, senators urged Synapse’s owners, bank, and fintech partners to restore customers' access to their money.

To add more fuel to the fire, Evolve has been caught in the middle of a data breach by the criminal organization LockBit. 

The problem isn't just with Synapse and Evolve. Neobanks like Yotta, Juno, and Copper, partnered with Synapse and Evolve, misled consumers into believing their deposits were fully FDIC-insured when, in fact, they were not.

One consumer, Patrick Spaulding Ryan, shared in an open letter to CFPB director Rohit Chopra on LinkedIn that Yotta told customers their funds were held at a member FDIC bank. The CFPB and the FDIC need to prioritize safeguarding consumers above adhering to “narrow interpretations of institutional mandates,” he wrote. 

The situation has deteriorated further, with Synapse moving its Chapter 11 bankruptcy to liquidation under Chapter 7 after a US trustee cited mismanagement. The FDIC disclaims responsibility because the funds are held by a payment processor, not directly by an insured bank. Check out a complete timeline of happenings here. 

Rohit Chopra, director of the CFPB, rightly pointed out in Semafor that the "move fast and break things" mentality in fintech is not working, a catchphrase that rose alongside the “bro” culture that has trickled down from our predecessors in the technology sector, particularly in terms of funding and leadership.

In addition, the "rent a bank" model, which gave rise to a generation of fintech startups, needs closer scrutiny. The FDIC is also examining banks that cater to fintech after issuing warnings last year. 

It’s time for a change. The collapse has starkly exposed the urgent need for greater consumer protections and stringent vetting processes for fintech companies that “act like banks.” Additionally, it underscores the critical importance of diversity in leadership roles, particularly among startup founders shaping our economy's future.

Women in leadership have consistently demonstrated a commitment to ethical practices and a profound understanding of the communities they serve.

• Research from the University of California, Riverside, indicates that women tend to internalize moral traits more strongly and are less likely to engage in unethical negotiating practices than men. In a specific negotiation scenario, women showed a greater commitment to ethical behavior, such as honesty and trustworthiness, and were less likely to rationalize unethical decisions, per Harvard Law School.

• An analysis by MSCI revealed that companies with strong female leadership experienced fewer governance-related controversies, such as fraud, corruption, and shareholder battles.

• A report by the Deloitte Global Center for Corporate Governance found that boards with greater gender diversity tended to have more effective governance and oversight mechanisms, contributing to better organizational performance and ethical standards.

I, for one, am tired of seeing our industry—or sectors of fintech like the crypto space—enter the cultural consciousness only to be remembered as a bunch of startups hurting consumers instead of empowering them. This feels eerily familiar to the FTX collapse, where promises of democratizing finance ended in betrayal and financial loss for many.

As long as we continue to fund and promote failed male founders over female founders with products that work and innovative ideas that open financial markets to the most underserved, we’ll continue to run into crises. It’s time to prioritize ethical leadership and proven performance, which statistically means giving more opportunities to women in fintech.

Moreover, we need to discard the tired excuse that regulation stifles innovation. Instead, let’s recognize that thoughtful regulation can actually fuel innovation. By setting clear guidelines and ensuring ethical standards, we can create a fintech landscape that thrives when it protects and uplifts consumers.

Imagine a fintech landscape driven not by the pursuit of quick profits but by the genuine desire to create positive social impact. Such a transformation is not only possible but imperative.

By supporting and investing in female founders and executives, we can steer the industry towards a future that genuinely serves the financially vulnerable rather than exploiting them.

The road ahead demands bold decisions and a willingness to challenge the status quo.

As a fintech optimist, I believe this generation of leaders, particularly female leaders, is well-equipped to rise to the challenge and fulfill fintech’s promises.

Let's ensure that fintech's next headlines are about its success in uplifting the underserved, not its failures in protecting them.

_{WTF ELSE?}

• Wealth management platform market size to reach $15.8 billion. 

• Fintech Atlas launches platform with card and concierge services - Fortune

• Banking on GenAI: The artificially intelligent future of finance

• Japan intensifies efforts to address gender pay gaps

• Research shows mobile money spend set for 51% growth to $2.37 trillion

_{I WANT IT, I GOT IT}

• 📚 Today’s Read: My friend and New York Times bestselling author Dr. Daniel Crosby has an upcoming book, The Soul of Wealth, which is available for pre-order. It’s a must-read for anyone looking to grow and evolve their relationship with actual wealth.

• 👀Today’s Watch: This "Hot Ones" episode with Lupita Nyong’o is absolutely fantastic. Intelligent questions, inspiring answers, and spicy takes.

• 🍣Today’s Eats: Having Whole Foods sushi during a picnic and movie night in Bryant Park is one of my favorite NYC summer activities.

_FINTUNES

🎵Chappell Roan - HOT TO GO!

I just joined the Chappell Roan fan club, and let me tell you, it’s been a wild ride! After seeing a crowd in Washington Square Park singing along to every word of her songs, I knew I had to check her out. What I discovered is an amazingly talented singer, songwriter, and storyteller.

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That’s all for now! See you Thursday!

Love,

Nicole 💜