(Bloomberg) — Fintech company Mercury Technologies Inc. said it is cutting ties with longtime banking partner Evolve Bancorp Inc. The decision comes after a slate of operational issues at the bank unfolded in public view.
Mercury plans to finish the migration of its customers from Evolve to one of its other bank partners, Choice Financial Group or Column National Association, by the end of this year, a spokesperson for the company said. The businesses that need to migrate away from Evolve will have uninterrupted access to Mercury during the process, according to the spokesperson. Clients will need to verify the accuracy of their information and agree to terms and conditions of the new bank partners.
“Mercury and Evolve will collaborate closely to help ensure a smooth transition,” Mercury said in a statement. “Once the switch to a different Mercury bank partner is complete, customers will see enhancements to the Mercury experience in some cases, such as faster ACH (Automated Clearing House) and wire transfers as well as the ability to accept wires in foreign currencies.”
Mercury partnered with Evolve Bank & Trust, a subsidiary of Evolve Bancorp, in 2019 when the business was a nascent startup with few customers, according to the company’s spokesperson. As a so-called neobank, its ambition was to offer software-enhanced banking services including checking accounts and cards to businesses. Since the company lacked its own banking license, Mercury needed to find a bank to operate behind the scenes to hold customer funds and facilitate the movement of money. Such sponsor banking arrangements are how fintechs including Chime Financial Inc. and Affirm Holdings Inc. offer banking services without holding their own bank licenses.
Mercury processed more than $95 billion in 2023 and by early 2024 it was servicing more than 200,000 businesses, according to its most recent annual letter. As Mercury’s clients and the scale of its business grew, the startup added new bank partners Choice Bank and Column Bank, led by Plaid cofounder William Hockey. In 2022, Mercury began opening nearly all of its new client accounts with Choice and added Column as a partner in 2024, according to the company’s spokesperson.
In its early days, Mercury worked with now-bankrupt banking-as-a-service provider Synapse Financial Technologies to facilitate its connection with Evolve. In October 2023, Mercury moved to a direct relationship with Evolve as issues with the Synapse partnership began bubbling to the surface. In April 2024, Synapse filed for bankruptcy protection, leaving thousands of fintech customers without access to funds held in their accounts.
In June of last year, Evolve was hit with a Federal Reserve enforcement action concerning its risk management practices. Evolve is one of several fintech sponsor banks that were subjected to enforcement actions related to oversight of third-party relationships. The bank also announced last year that it had been victim of a ransomware attack that allowed criminals to access information on customers. A spokesperson for Evolve confirmed that Mercury was ending its relationship with the bank, and said the company will work closely with Mercury to ensure an orderly wind-down of the partnership over the coming months. “We do not expect any account interruptions during the migration,” the spokesperson said, adding that the process “will not interfere with Evolve’s ongoing derisking plan of its open banking relationships, which began over a year ago” and has also resulted in a more rigorous onboarding process for new customers and enhanced compliance oversight. Earlier this month, the neobank Dave Inc. also announced plans to drop Evolve and switch to Coastal Financial Corp. as its primary banking partner.
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