Onyx Private, a Y Combinator-backed digital bank that offered banking and investment services to high-earning Millennials and Gen Zers, has announced the termination of its bank operations.
In an email sent to customers on March 13th, with a subject line reading "Important Notice: Termination of Bank Operations and Account Closure," Onyx Private informed clients that their decision to discontinue services and initiate account closures would take effect immediately. Co-founder and CEO Victor Santos confirmed this development in a conversation with TechCrunch.
A Shift in Business Model
According to Santos, the company is moving away from its B2C model and transitioning to a B2B white-label platform-as-a-service model for community banks, regional banks, and credit unions. This new direction aims to provide these financial institutions with digital apps built specifically for young affluent consumers.
Santos explained that Onyx had been exploring this idea over the past year and had made significant progress with some partners. However, he declined to disclose further details on the company’s current partnerships or client base.
Rise of Regulatory Issues
A source close to the matter suggested that regulatory issues may have contributed to Onyx Private’s decision to terminate its bank operations. However, Santos dismissed this notion, stating that no regulatory issues led to the shutdown of their direct-to-consumer banking services.
"It was purely a strategic decision," he emphasized. "This allowed us to leverage our existing base of financial institutions and use the technology we’ve built to scale in a more capital-efficient manner."
Banking Partnerships
At the time of its fundraise in May, Onyx Private had named Piermont Bank as its banking partner. Today, their website indicates that "banking services are provided by i3 Bank." Santos confirmed that Onyx started with Piermont but transitioned to i3 last year.
Piermont declined to comment on this development, while TechCrunch has reached out to i3 for further clarification.
Impact on Customers
In the email sent to customers, Onyx Private informed clients that account closures would take place on April 14th. However, they also announced the immediate cessation of their rewards program.
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Background on Onyx Private
Onyx Private had announced in May that it had raised $4.1 million in venture funding from investors such as Village Global, Y Combinator, and others. At the time, the company reported growing 30% month-over-month since its launch nearly a year prior, processing over $4 million in transaction payment value per month.
Santos claimed that Onyx Private was nearing $5 million in total payment volume (TPV). However, he declined to disclose the exact number of banking customers the company had at the time.
Y Combinator’s Status on Onyx Private
In an update post-publication, Y Combinator has listed Onyx Private as "inactive" on their website. Santos was unable to provide insight into this development.
Consequences and Future Directions
The termination of Onyx Private’s bank operations raises questions about the company’s future prospects in the fintech industry. As it shifts its focus towards a B2B white-label platform-as-a-service model, it will be essential for the company to navigate regulatory requirements and adapt to the needs of its new target market.
Industry Impact
The sudden termination of Onyx Private’s bank operations highlights the challenges faced by fintech startups in navigating complex regulations and scaling their business models. As the industry continues to evolve, companies must remain agile and responsive to changing customer needs and regulatory requirements.
Sources:
- Email sent to customers on March 13th
- Conversation with Victor Santos, Co-founder and CEO of Onyx Private
- Y Combinator’s listing of Onyx Private as "inactive"
- Onyx Private’s fundraise announcement in May