Mercury, a fintech that offers mobile banking to small businesses, has ended its relationship with its longtime 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 small 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 a Mercury representative. “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 de-risking 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
“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,” Montez said.
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 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 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, many of 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.
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.
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. The process didn’t scale and had potential for human error.
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.
