Jul 12, 2019 · 50m · a16z
Founding Stories: Synapse
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this a16z interview, General Partner Angela Strange speaks with Synapse CEO and founder Sanket Pathak about the revolution in banking infrastructure, explaining how modular APIs and automated compliance allow startups and non-fintech companies to launch innovative financial services.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 3.9 Guest teaching 4.2 Guest disagreement 0.2 The host pushing back 0.1
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 44:28 Reframing Founder Question
Sanket directly edits Angela's prompt, shifting her question from general first-time founder surprises to focus specifically on first-time technical entrepreneurs.
Hardest push from the host ▶ 6:08 Interrupting to Clarify PivotAngela interrupts Sanket's narrative to re-steer him, pressing for clarity on why he moved from running a consumer brand to solving backend infrastructure.
Biggest teaching moment ▶ 16:31 De Novo Bank Restrictions BreakdownSanket educates Angela on regulatory 'baby wheels' for new de novo bank charters, detailing forced phone calls to the Fed and 10% collateral requirements.
The host holds their own ▶ 28:35 Citing Citi Compliance Workforce StatsAngela demonstrates sharp domain authority by citing specific data on Citigroup employing 30,000 compliance workers representing 15% of their total workforce.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Synapse Founding Story and Personal Banking Frustrations | 1 | 3 | 0 | 0 | Angela opens with basic biographical questions about Sanket's background coming from India to Memphis. Sanket explains his personal struggles opening accounts with Chase, BofA, and Simple, educating the host on how legacy KYC standards exclude immigrants. | |
| Pivoting from Consumer App to Banking Infrastructure | 2 | 5 | 1 | 1 | Angela interrupts gently to keep Sanket focused on the pivot from consumer app to banking infrastructure. Sanket explains how partner bank legacy stacks like Bancorp's forced him to build a modular banking core instead. | |
| Who Needs More Financial Services? | 3 | 4 | 0 | 0 | Angela contributes domain ideas regarding rate competition and asks whether financial literacy aligns with income. Sanket breaks down internal research classifying consumers into three behavioral buckets. | |
| Sponsor Banks and Regulatory Compliance Overhead | 5 | 5 | 0 | 0 | Angela demonstrates strong domain knowledge, asking targeted questions about state vs federal charters, Fed/OCC oversight, and post-recession de novo freezes. Sanket explains regulatory audit frameworks, BSA/PATRIOT Act compliance, and FDIC requirements. | |
| Sponsor Bank Incentives and Deceptive Marketing Risks | 6 | 5 | 1 | 1 | Angela highlights VC realities around $100M capital requirements, praises UK neobanks, and notes that 'fake it till you make it' in fintech leads to jail time. Sanket details UDAP rules, Robinhood's deposit launch disclosure errors, and bank regulatory liability. | |
| The Complex Vendor Stack in Fintech Infrastructure | 4 | 5 | 0 | 0 | Angela defines key terms like KYC and notes card art design as a primary pain point for startups. Sanket details the 8 to 10 distinct vendors required for card issuance, acquiring, ACH, and check printing. | |
| Centralizing Infrastructure and Automated Compliance | 7 | 4 | 0 | 0 | Angela displays strong expertise by citing specific industry data regarding Citigroup employing 30,000 compliance personnel (15% of staff). Sanket explains how Synapse centralizes rules to lighten bank oversight burdens across 50 programs. | |
| Autopiloted Compliance and In-House Stack Strategy | 3 | 6 | 0 | 0 | Angela prompts the discussion on build vs buy decisions. Sanket educates the host on using computer vision OCR and time-series LSTM models to create 'autopiloted' compliance while replacing Jack Henry with in-house processing. | |
| Winning Early Customers with a One-Stop Shop Model | 3 | 4 | 0 | 0 | Angela asks how an unknown startup wins early clients and structures partner agreements. Sanket explains offering high-touch Slack support and using a single master agreement model to eliminate complex tri-party contracts. | |
| Creative Fintech Startup Ideas: Dave and Empower | 4 | 3 | 0 | 0 | Angela adds specific facts regarding overdraft fee inflation from $20 to $35 over ten years. Sanket explains why VCs initially underestimated consumer demand for Dave's overdraft prevention model. | |
| Company Philosophy and Public Roadmap | 5 | 4 | 0 | 0 | Angela outlines the strategic shift where non-fintech platforms (like Lyft) embed financial services for higher margins rather than selling user data or showing ads. Sanket compares this progression to the growth of the Apple App Store. | |
| Surprises as a First-Time Technical Founder | 2 | 4 | 1 | 0 | Angela asks a broad question about scaling surprises as a first-time founder. Sanket gently reframes the question specifically around 'first-time technical entrepreneurs', describing his transition from coding to becoming an editor of teams. | |
| The Future of Financial Infrastructure and Expanding Access | 5 | 3 | 0 | 0 | Angela introduces Propel and cites national statistics on food stamp usage (1 in 7 US families). Sanket expands on real-time decisioning for food stamps, SME loans, and portfolio management before Angela closes with an internet protocol analogy. |
Statements from this episode (23)
Pathak: Simple founder Shamir Karkal couldn't open his own bank account
“Later I talked to Shamir, who was the founder of Simple, and he said even he didn't have a Simple bank account.”
Pathak: Early neobank Simple was essentially a reseller for Bancorp Bank
“Simple has a bunch of obligations that they've had to kind of outsource in a way to Bancorp Bank, which was their partner bank and based on whatever their KYC standards were and KYC policies were, that's all Simple could So in a way, Simple was just a reseller…”
Pathak: Modular banking infrastructure enables financial services for underserved populations
“Let's not try to make a new Simple. Let's just try to make a new Bancorp, with the idea being, if we can make the underlying infrastructure extremely more modular than it is today, it can accommodate for immigrants, it can accommodate for people who don't have…”
Strange: Early neobanks historically required 18 to 24 months to launch
“Many of them took 18 months, two years to get launched, because there's a whole series of partnerships that need to happen on the back end, usually added technology that needs to be written on top of those partnerships, so I thought we could almost walk throug…”
Pathak: Only two or three new US banks chartered since 2008
“No, because after, after the last financial recession, there has been I think about only two or three new banks that have actually been de novoed.”
Pathak: Newly chartered US banks face two years of regulatory restrictions
“And based on the current regulations if they stay the way they are it puts, even if someone were to become a new bank today, for next two years, they would be pretty much kind of in a restricted category with the Fed and also with the FDIC.”
Pathak: Legacy banks lack software skills to acquire digital customers efficiently
“Banks, in most cases, are not good at, like, building out new software interfaces and tools and for that reason, even if they blew up their marketing, it would be highly unlikely that they'd be able to get in a lot of these customers.”
Strange: "Fake it till you make it" in fintech leads to jail
“Fake it until you can make it, and financial services will land you in jail, versus some of the others.”
Pathak: Regulators hold sponsor banks liable for fintech partner compliance failures
“The bank bears the risk for the primary regulators. Now we've seen precedent being set where CFPB goes directly to fintech companies and also finds them, but mostly what happens is your primary regulator is going to knock on your door, you're being the bank's …”
Pathak: Launching a neobank traditionally requires eight to ten vendor partnerships
“Well, eight to 10, because the pieces we haven't talked about is other use cases we can talk about how this applies for lending, but in case of neobanks, your customer wanting to pay a bill, and the way they pay a bill is with the check. Do you send them a che…”
Strange: Card art design is the top pain point for early fintechs
“Getting, getting the card art right is a problem that I hadn't thought that much about, except for it is probably the number one pain point of card design. From most of the new companies that I talked to.”
Strange: Citigroup employs 30,000 compliance workers, 15% of its total workforce
“I think the latest stats for someone like Citi. They have 30,000 people in compliance, like 15% of the workforce.”
Pathak: Up to 90% of banking back-office functions can be automated
“A lot of the back office functions that banks are hiring people for you can by and large automate depending on what type of operation it is from like 80 to high nineties percent”
Pathak: Synapse will not seek to acquire its own banking charter
“We're most likely not going to go and get a charter.”
Pathak: Synapse avoids tri-party agreements to simplify customer onboarding
“So we've kind of like always only partnered with people where no tri-party agreements are needed. So they just come and sign an agreement with us, and then we kind of manage everything else behind the scenes.”
Strange: US bank overdraft fees rose from $20 to $35 in a decade
“Well, overdraft fees have gone up, like, to 35 dollars now from 20 just 10 years ago, as I was checking yeah, so that's a pretty big chunk of change.”
Pathak: Synapse CEO uses only customer fintech cards, no legacy banks
“At this point, I don't have an account with Bank of America, Chase, Wells Fargo, anyone. I literally only have my customers' cards in my pocket.”
Pathak: Empower will surpass neobanks like Chime and Varo within months
“So pretty much, at this point, in a couple of months, they've been able to get at par With any other new banking customer you can think of. Maybe Chime, maybe Varo, all of these people. They started after them, and now are at the point where we are, and next c…”
Pathak: Airbnb and non-internet companies will soon launch embedded financial products
“Lyft, Uber, they're doing it. Airbnb probably is going to do it. They're also going to have companies that have not even been internet companies starting to offer this.”
Strange: Every company will eventually become a fintech company
“So every company can be a fintech company.”
Pathak: Founder role transitions in fast-growing startups are sudden step functions
“When your company is growing very quickly, that switch is a step function. It's not a gradual switch. It doesn't give you a lot of time to be like, okay, I have about six months before I can improve on this. You have to quickly be able to change.”
Strange: One in seven US families moves on and off food stamps
“One out of seven families in the U.S. Is on and off of food stamps,”
Pathak: Unified high-net-worth banking and wealth platforms will emerge within a year
“All the way to high net worth individuals and how can you build out better portfolio management for them that doesn't just only account for public stocks that they have to buy, but goes across board from checking all the way to portfolio management. That last …”