MrBeast's finance app for kids is backed by a -2-

Rather than partnering with banking giants, many fintech apps rely on a small group of regional banks that specialize in these arrangements. Those partnerships can involve experimental financial products and fast-growing startups - risks that larger institutions often avoid, but which some smaller banks have turned into a business model, experts say.

'In the past, celebrity endorsements have often pushed people toward suboptimal financial products. MrBeast could be fine, but the emergence of finfluencers bears watching.' Adam Rust, director of financial services, Consumer Federation of America

Evolve, for example, opened a century ago as a bank for farming communities in eastern Arkansas. Now headquartered in Memphis, it still operates regional branches in Arkansas and Tennessee - but a timeline of the bank's history on Evolve's website notes 2017 as a pivotal year when it "embraced the Open Banking movement," by partnering with fintechs to allow them to integrate Evolve's banking services. The bank is privately owned by an investment group led by Scot Lenoir, Evolve's website shows.

Evolve's website lists partnerships with 14 companies, including Step, Affirm, EarnIn and Melio.

These partnerships can be risky, regulators say, and the April 2024 collapse of Synapse Financial Technologies serves as a cautionary tale. Synapse was a Silicon Valley firm that connected fintechs with the banks that stored customer funds, and counted Evolve among its primary partners. After the collapse, thousands of customers of fintechs that worked with Synapse lost access to their savings for weeks or months, as banks and fintech firms tried to determine where funds were held and who owned them, according to court filings in Synapse's bankruptcy proceedings.

Some customers have yet to recover the full amount of their deposits, according to a reconciliation website Evolve created after the Synapse bankruptcy. The company imploded after a dispute with bank partners revealed a massive shortfall in customer funds and a failure to keep accurate ledgers, according to court filings in Synapse's bankruptcy proceeding.

An estimated $96 million in customer funds went missing at Evolve and other banks tied to Synapse, as did around $26 million in card fees that Evolve charged from Synapse customer accounts, the Wall Street Journal reported in February 2025, adding that a federal grand jury in Manhattan was investigating the situation. Both Synapse and Evolve blamed each other for the missing funds, according to the Journal. The FBI and the U.S. Attorney's Office in Manhattan declined to comment.

Evolve returned some missing funds to Synapse customers as recently as February. But an Evolve website dedicated to its efforts said other firms that worked with Synapse have not provided Evolve with the data needed to identify missing funds and "complete a full reconciliation," because customer records were spread across multiple partner banks and Synapse no longer has the operational ability to reconcile the records.

In July 2024, two months after Synapse filed for bankruptcy, the Federal Reserve Board of Governors issued a joint statement with the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency noting the risks that come with partnerships between fintechs and banks, including potentially misleading marketing regarding FDIC deposit insurance. Banks provide FDIC insurance of up to $250,000 per depositor in the event of a bank failure - but lines can blur when a third party gets involved.

The Federal Reserve Board said fintechs could be "reasonably mistaken" for an insured bank, especially if they refer to FDIC deposit insurance in marketing materials. "End users may not be aware that access to their funds may depend on the third party and that deposit insurance does not protect against losses resulting from the failure of the third party," the statement said.

So while Evolve is insured by the FDIC, that protection only applies when an insured bank fails. Because Synapse - the intermediary connecting fintech apps and banks - was the entity that collapsed, the insurance was not triggered.

Promotions for Step's financial products on its website advertise FDIC insurance, but regulators say this can create a false sense of confidence about how safe users' money is, since they would have to read the fine print to learn that Evolve is FDIC-insured, not Step itself.

The stakes for consumers have risen in the current regulatory environment too, said Aaron Stephens, a senior legislative strategist at the progressive lobbying firm P Street.

"With the Trump administration hampering enforcement agencies like the Consumer Financial Protection Bureau, having megainfluencers - whose young audiences could be susceptible to finding themselves in precarious financial situations because they trusted the wrong YouTuber - own and push their subscribers to join untested financial institutions is concerning," Stephens said.

The White House did not provide comment regarding the regulatory environment of fintechs when reached by MarketWatch.

What Evolve's troubles could mean for Step

Evolve's challenges have extended beyond the arrest of its CEO and the Synapse bankruptcy.

A month after Synapse collapsed, Evolve was hit by a ransomware attack that leaked the personal data of 7.6 million customers, according to a government report. In June 2024, the Federal Reserve Board sent Evolve a cease-and-desist order, demanding Evolve overhaul its risk-management and compliance programs. Evolve said the order is "similar to orders received by others in the industry" and doesn't affect its business, Reuters reported at the time.

As these setbacks played out, Evolve lost clients. Payments company Stripe and business-banking fintech Mercury each parted ways with Evolve within the past two years, according to documents the companies have made public. Neither company publicly explained the reason for the change. Buy-now-pay-later provider Affirm and cash-advance app Dave (DAVE) still work with Evolve, according to their respective websites, though both companies added another partner bank after the Synapse bankruptcy.

Affirm added Stride Bank in April 2025 as another issuing partner for the Affirm debit card, saying at the time that the partnership would help strengthen and diversify the company's platform as it scales the product. Dave did not respond to a request for comment.

Step, which says its goal is to make financial wellness more accessible to young people through its app and financial tools, remains an Evolve client, and the relationship with the bank is an important part of Step's operations today.

-Genna Contino

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