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The collapse of a little-known middleman called Synapse Financial Technologies has highlighted the threat consumers face when popular banking companies are set up.
By Rob Copeland
If it looks like a bank, advertises itself as a bank, and accepts cash like a bank, it’s probably not a bank.
This is the lesson painfully inflicted on the tens of thousands of savers who have entrusted their savings to online-only lenders. They have names like Juno, Yieldstreet, and Yotta and promote accounts that pay maximum interest rates and offer Federal Deposit coverage. Insurance Corporation, the U. S. regulator tasked with rescuing failing banks.
These features have made them and other popular banking companies with a logo (such as Betterment, Chime, and Wealthfront) look a lot like banks. But, to the amazement of many depositors, those corporations simply collect cash and direct it to banks through intermediaries.
This would possibly have seemed like an educational point before this year, when the collapse of Synapse Financial Technologies, a software provider in the middle of this chain, highlighted the threat customers face when they turn to those new lenders, instead of depositing funds. . cash directly at a classic bank. Since Synapse was not a bank, the F. D. I. C. Insurance was not automatically applied and about $100 million in deposits were frozen or lost.
After the New York Times wrote about the issue last month, readers asked how they could tell if their own cash was safe. Here are some answers.
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