The FinTech sector in North American is a tale of partnerships; startups having to find banking partners due to extensive regulations, and financial institutions trying to keep up with the digital age and looking for innovative solutions.
“It was immediately obvious that the company was uniquely positioned to unlock real value in the ecosystem.”
All this all encompassed by an industry that is slow to adapt to such changes and hard to break into for newcomers. This reality has led to the need for even challenger bank-style FinTech startups to partner with existing financial institutions in order to offer their products.
Enter Synctera, a North American startup looking to streamline partnerships between community banks and FinTech companies.
Newly launched out of stealth mode, Synctera is co-founded by Peter Hazlehurst, former head of Google Wallet and Uber Money, who left the latter organization earlier this year after Uber decided to shift focus away from financial services. Synctera’s founding team also has some notable Canadian FinTech pedigree with the now-former CTO of Koho and Portag3 Ventures, Kris Hansen.
The pair, along with head of product Dominik Weisserth, created Synctera and have been operating in stealth mode since earlier this year. Now, with $15.8 million CAD ($12.4 million USD) in seed capital, the startup is officially launching its product in the United States.
Synctera provides a two-sided marketplace, connecting startups and financial institutions so they can partner to launch products. “We’re basically building a layer that fits between banks and partners to facilitate … FinTech partnership, and to create a marketplace in the middle … that helps bring these worlds together,” Hansen told BetaKit.
Synctera may be a young company, but that value proposition has attracted notable investors in the FinTech landscape.
The startup was created with the support of Portag3-backed venture builder Diagram Ventures, which invested in the seed round. The all-equity round was led by Lightspeed Venture Partners, and included a number of angel investors such as Affirm and PayPal founder Max Levchin; Zachary Perret, CEO of Plaid; Alexa Von Tobel, founder of LearnVest and Inspired Capital; and Henry Ward, CEO at Carta.
Following the investment, Synctera’s board of directors consists of Hazlehurst, who serves as CEO, Ansaf Kareem, the lead Investor at Lightspeed, and Diagram partner Frederic Latreille.
Founded during the year of a global pandemic, Synctera is a fully remote company with operations in the United States and Canada. Incorporated in America, Synctera also has a Canadian subsidiary and its engineering team is based out of Toronto.
“Our business vision is this is not just limited to the US, it’s a global play.”
– Frederic Latreille, Diagram
The startup is building a partnership banking marketplace in order to connect community banks with FinTech platforms. The idea is to reduce risk, ensure compliance with various regulations such as Anti Money Laundering (AML) and Know Your Customer (KYC), and increase the speed at which FinTechs and banks can bring tech solutions to market.
“What I saw was really an opportunity to decouple that relationship, which is typically bilateral agreements and a one-to-one integration per partner, and just really create more of a marketplace,” said Hansen.
While the North American financial marketplace may be defined by the need to develop partnerships, doing so has not always been easy. Many large institutions have come around over the last couple of years to see the value in working with FinTech partners, but their complex organizational structure often makes scaling such partnerships difficult. At the same time, smaller banks and credit unions may have more flexibility in this arena, but often less resources to do so.
“In our model where we research a lot with the market and find great opportunities to create companies, we came across this whole banking-as-a-service space and identified it as a huge problem to solve, with a lot of potential [and] a lot of growth, given the growth of FinTechs,” said Diagram’s Latreille in an interview with BetaKit. “[Synctera’s] business model is indeed novel and it’s how, basically, a lot of the challenges that the industry is facing are going to get solved or addressed.”
Kareem expressed a similar sentiment about the startup. “At Lightspeed, we have spent a lot of time investigating the financial infrastructure stack, in particular, banking as a service,” he said. “When I came across Synctera, it was immediately obvious that the company was uniquely positioned to unlock real value in the ecosystem.”
Synctera’s platform will initially be available solely in the US. It is launching with two partners: Coastal Community Bank, a local Washington State bank, and One, a digital banking platform focused on financial wellness.
“We view this as a technology platform that’s really broad, and it’s portable,” said Latreille. “Our business vision is this is not just limited to the US, it’s a global play.” The Diagram investor told BetaKit Canada as one of the countries on Synctera’s roadmap.
Hansen would not share details on when Synctera may look to offer its platform outside of the US. He stated, however, that Synctera views its platform as “regulation agnostic” making it easy to launch in various markets.
Hansen’s decision to launch Synctera left one of Canada’s most notable challenger banks, Koho, in search of a CTO. Hansen officially ended his tenure with Koho in October. Koho confirmed to BetaKit that it has hired a new CTO who will begin in January. Hansen is set to stay on with Portag3, however, he will be stepping back to an advisor role.
UPDATE 10/12/20: This article has been updated to note that Koho has hired a new CTO.