A recent high-profile failure of San Francisco-based fintech company Synapse has left tens of thousands of people’s accounts with up to $96 million missing. The incident highlights the risks associated with using these banking apps, which often rely on complex arrangements between popular fintechs and FDIC-insured partner banks.
Key factors contributing to Synapse’s failure include poor record-keeping, resulting in account errors and difficulties for customers accessing their funds. Forensic accountants and attorneys are still piecing together the events leading up to the bankruptcy filing in April 2024.
To avoid falling victim to fintechs like Synapse, it’s essential to work directly with banks insured by the FDIC or credit unions insured by the NCUA. Be cautious of companies that advertise banking services without providing clear FDIC or NCUA insurance information.
If you do choose to use a fintech, follow best practices:
– Keep emergency funds outside of the account
– Verify the partner bank’s FDIC coverage using the BankFind tool
– Check how deposits are transferred and recorded by the fintech company
Source: https://www.investopedia.com/think-fintech-is-safe-this-hidden-danger-could-cost-you-8758561