Business banking fintech Mercury, bank partner Evolve split

Mercury, a fintech that offers banking to businesses, has ended its relationship with its long-time partner Evolve Bank & Trust. Mercury will migrate its customers over to its other sponsor banks, Choice and Column. 

The move comes a few weeks after another Evolve partner, Dave, shifted its partnership with Evolve to Coastal Community Bank, and almost a year after Synapse, a middleware provider to Evolve and many fintechs, filed for bankruptcy.

Mercury offers bank accounts and payment services to businesses. The company has scaled up quickly and has outgrown the bank partner and middleware it started with, Evolve and Synapse, Mercury representatives said. They also said that once the bank switch is complete, customers will see faster ACH and wire transfers as well as the ability to accept wires in foreign currencies. 

“We did not come to this decision lightly,” said Catherine Unertl, head of financial partnerships and operations at Mercury. “Evolve has been our partner since 2019. They were the first bank we really started to scale with.”

A spokesman for Memphis, Tennessee-based Evolve Bank said that though the bank is disappointed to see Mercury go, “Evolve respects their decision and wishes them continued success. Evolve continues to enjoy very successful and strong business relationships with many fintech partners.” 

For the past year, Evolve has been derisking many of its open banking relationships, the spokesman said. “That means taking hard looks at our partners and their end users,” he said. “Some of this work entails working with our fintech partners to remove certain high-risk end users from their platform.” Some partners have not agreed with these risk assessments and have chosen to seek other partner banks, he said. 

Bank-fintech partnerships across the board have been under strain, especially since Synapse’s bankruptcy left hundreds of thousands of fintech customers with locked accounts and missing funds.

“Over the past year, the cracks in the BaaS model have become impossible to ignore,” said Tiffani Montez, principal analyst for banking at research firm eMarketer. “With rising scrutiny and a renewed focus on risk management, banks are being forced to make tough choices — scale up with the right partners or get squeezed out. 

“As partnership-driven business models evolve, the need to reassess business value, tighten risk controls and align with partners that offer real scale is unavoidable.”

eMarketer analysts have predicted that industry fallout would force many smaller banks out of banking as a service entirely or drastically limit their partnerships, she said. 

“Now, we anticipate 20% of existing partnerships will be terminated,” Montez said.

Jim Perry, senior strategist at Market Insights, said he expects to see more shifts in partnerships as fintechs grow, “even including fintechs purchasing or becoming licensed banks themselves.”

How it started

In 2019, Mercury was a Series A startup looking for a bank partner with which it could launch and test its products. 

“One of the best ways to do that at the time was with Synapse and Evolve, mostly because Synapse was a middleware layer that was building technology for banks that maybe didn’t have tech departments where they could build it themselves,” Mercury’s Unertl said. “Evolve was a bank that was strong in the banking as a service space, and an early adopter of the BaaS model.”

At the time, Mercury’s customers were seed stage or Series A companies doing relatively small transactions. Over time, Mercury and its customer base grew and so did their transactions, from payments of about $100,000, to $1 million or $10 million transactions.

“That’s the point where we started to feel a little bit of friction, where things would come up and transactions wouldn’t settle the way that we had expected to, or they would be slow,” Unertl said. “We’d reach out to Synapse, because that’s who our official partner was at the time, and they would point us to the bank. Then we’d reach out to the bank, and the bank would point us back to Synapse, and that game of telephone started getting frustrating.”

The Mercury team decided that redundancy and being closer to its bank partners would be helpful. Mercury built a direct partnership with Choice Bank, with no middleware layer.

“That turned out really well, because there wasn’t this game of telephone,” Unertl said. “We could go directly to Choice with any issue that popped up, and talk to someone who was directly connected through the actual payment rail and bank.”

Because the direct relationship seemed to work better, in 2022, Mercury decided to move most of its onboarding of new customers to Choice. For existing customers in the Mercury-Synapse-Evolve triangle, Mercury chose to work directly with Evolve and remove the middleware layer. Mercury migrated those customers directly to Evolve in October 2023. 

Then there were hiccups. Sending international wires meant getting on a phone call with two people at Evolve and manually confirming all of the details of each wire. This was taking four or five hours a day, Unertl said. The process didn’t scale and had potential for human error.

Mercury stopped sending international wires through Evolve, sending them through Choice instead. 

Unertl stressed that Mercury never had an accuracy issue with Evolve. The issues were about operational efficiency and being able to do things like send wires more quickly. Mercury was also concerned about the possibility that the relationship with Evolve was eroding customer trust, due to the problems that came to light when Synapse’s bankruptcy left many fintech end users stranded, she said. Shortly after that, Evolve suffered a data breach.

Mercury’s other two bank partners, Choice and Column, are able to handle tasks like sending wires in a more automated way, without delays. Mercury says the customer rollover will be completed in cohorts over a period of months.

“It’s really an issue with scale, where we’ve scaled past the relationship, and so now is the time to sort of move to partners who are ready for our next stage of growth,” Unertl said.

Former Synapse founder and CEO Sankaet Pathak has said that in migrating off of Synapse, Mercury moved nearly $32 million more in end-user balances than it should have from Evolve accounts. This is one of the reasons customer funds are missing, in his view.

Mercury representatives say this is not true. “We tracked the migration very closely,” Unertl said. “We watched dollar for dollar things move over the weekend that we did the migration, and did a lot of balance checks along the way to make sure that customer balances stayed exactly what they should be. Then this accusation was made, and obviously we take it very seriously. Like any claim like this is something we have to investigate, even if we don’t think it’s true.”

Mercury spent a year working closely with Evolve and auditors, confirming that everything was correct, Unertl said. “We’ve found no evidence of an over-migration through all of that work.”