Building the Future of Partnership Banking with Synctera

At Diagram Ventures, we continue to challenge ourselves to be forward-thinking as to what the world might look like. Not just tomorrow, or post-pandemic, but what are the changes that could unlock the next significant shift in technology and consumer behavior. It’s a large mandate to pursue and by no means do we do it on our own – but when big ideas are paired with passionate and driven entrepreneurs who strive to do the same – exciting things happen.  

Today we’re excited to share the launch and funding round of our latest portfolio company, Synctera. Together, we believe this team and technology will change the world of banking, FinTech, and financial products as we know it. 

 

How the idea came to be

Historically, banks have owned both the manufacturing of new financial product offerings and their distribution without much evolution. But over the past few years, consumer expectations for new financial services that are mobile-only and real-time have fueled a wave of adoption of emerging technologies and competition. This is pushing banks to attempt to innovate faster than they can afford. Unable to keep up, FinTech companies (with no banking charters) have started to partner with Banks (who have these charters) to new types of checking accounts, debt, saving accounts, cards, payments, and even lending solutions. This change is showing no signs of slowing down and is actually accelerating, as well as funded FinTech startups unencumbered by legacy platforms compete for consumers. 

The transformation in financial services is leading to consumer brands in multiple industries starting to offer banking, payments, and other services to their users. FromTelcos, like T-Mobile, or big-tech such as Uber, Apple, or Facebook, the market is moving towards a future of embedded finance. In these arrangements, the entity manufacturing financial products (i.e. the bank) is no longer distributing them and while this “unbundling” of financial services is at its early stages – we anticipate this shift will create a range of new opportunities within the banking and financial services sector as a whole.

 

The innovation process 

After months of research, analysis, and customer discussions, it was clear that the integrations between banks and FinTech startups were happening at an increased rate, but the process was far from seamless. 

 

“We’ve experienced first-hand how hard it was to launch a debit card while working with our portfolio company Wingo. We believed there should be a better way for FinTechs, banks and payment networks to work together – and that’s why we decided to tackle this massive challenge.” – Antoine Arbour, Diagram Innovation Senior Associate

 

From the banks’ perspective, there’s a three-part challenge:

  1. Each new FinTech partner comes along with a unique technology integration challenge. 
  2. Once a FinTech program is up and running, banks have limited visibility into regulatory compliance matters which exposes their banking licenses to significant risk
  3. As fintech programs and partnerships continue to grow, banks have a hard time scaling their back-office processes to keep up. 

On the other side of the marketplace, for FinTech companies, these challenges result in long product development cycles and high costs. In fact, it takes a minimum of 6-12 months and $250k to get a simple product to market. Moreover, pricing is still very opaque, and FinTech companies need to orchestrate a large number of compliance vendors to comply with banks’ requirements.

 

Welcome Synctera 

Synctera is a platform that helps community banks serve FinTech companies and global brands at scale with a compliance-first approach to integration and product offering. Synctera supports banks by identifying FinTech partners, integrating with them seamlessly, gaining full visibility across all compliance requirements, and easily allows the scale of their back-office operations. Synctera also helps FinTech companies find the best sponsor bank for their specific needs and brings a marketplace approach to transparent and fair pricing. 

As Synctera delivers on this vision, all types of technology companies will be able to launch or embed financial services in their product offerings—allowing the best product minds to only be constrained by their ambition and creativity.  

 

“Synctera is being developed by an outstanding team of entrepreneurs: Peter Hazlehurst, Kris Hansen, and Dominik Weisserth. We believe they have a unique combination of clear product vision, deep technical expertise, and empathy with both FinTechs and banks. Together, we believe we can build a generational company.” – Frederic Latreille, Partner at Diagram Ventures

 

Today the team announced its launch out of stealth mode, along with a $12.4M seed funding. The round was led by Lightspeed, with participation from Diagram VenturesPortag3 Ventures, and strategic angels including Zach Perret, CEO of Plaid; Max Levchin, Founder of Paypal and Affirm; Alexa Von Tobel, founder of LearnVest, and Inspired Capital; Henry Ward, CEO at Carta; and more.

 

“Diagram’s model is a unique opportunity to validate quickly and focus on building an impactful company.  I’ve seen first hand the challenges in building global FinTech businesses and after talking with Diagram about Synctera it was clear we shared the same vision. I’m really excited about our early traction that’s validating our approach to Partnership Banking and ultimately building out a new offering for Community Banks and Credit Unions – FinTech-as-a-Service.” Peter Hazlehurst, CEO & co-founder of Synctera

 

To learn more about Synctera, you can visit their website here.

 

At Diagram, we are continually inspired by the talent and passion founders bring to each idea and look forward to supporting Synctera and their mission to influence the future of banking.

 

We’ve been fortunate to partner with other leading entrepreneurs here at Diagram and are continually excited to talk to founders and top talent who want to join us.  If you want to learn more, get in touch.