Thousands ofAmericans got caught in fintech and lost access to bank accounts
The collapse of fintech middleman Synapse left thousands of Americans locked out of their bank accounts, raising concerns about the safety of fintech partnerships with banks. Regulators are scrutinizing banks providing services to fintech companies. Customers face financial distress despite believing their funds were protected by the FDIC.
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Thousands of Americans have been affected by the collapse of fintech middleman Synapse, losing access to their bank accounts and facing financial turmoil. More than 100,000 individuals with $265 million in deposits have been locked out of their accounts, including users of popular apps like Yotta. The failure of Synapse has raised concerns about the safety of fintech offerings that partner with banks instead of owning them. While these partnerships have been a growth engine for the industry, the Synapse debacle has highlighted potential risks for consumers. Regulators are now scrutinizing the banks that provide services to fintech companies, with the Federal Reserve recently reprimanding Evolve Bank & Trust. The FDIC has clarified that the failure of nonbanks won't trigger FDIC insurance, leaving customers vulnerable. Despite the promises of safety and innovation, many affected customers believed their funds were protected by the FDIC, only to find themselves in financial distress. The fallout from the Synapse disaster underscores the need for greater oversight and transparency in the fintech industry to protect consumers' interests.
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6 commentsEvolve, the bank that actually stores the money, says "Synapse’s abrupt shutdown of essential systems without notice and failure to provide necessary records needlessly jeopardized end users by hindering our ability to verify transactions, confirm end user balances, and comply with applicable law.".[2]
So much for "money as a service".
[1] https://www.forbes.com/sites/jeffkauflin/2020/04/01/broken-s...
[2] https://www.getevolved.com/about/evolve-responds-to-fridays-...
Here and unblock the EU payment systems are themselves regulated , distinctly from banks but along very similar lines. A big motivation for this was to avoid such failures.
I wonder if having fdic.gov basically say "beware of fintechs" is going to negatively impact the sector: https://www.fdic.gov/resources/consumers/consumer-news/2024-...
Remember when Voyager said it was FDIC insured?
We don't need to gamify finance. Just make it fast, easy and safe to transfer money between parties, please.
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Higher interest rates have caused 63 "problem banks" in the US, with $517 billion in unrealized losses. FDIC reassures this represents 1.4% of all banks, using the CAMELS rating system.
You Need a Backup Bank
Having a backup bank account is crucial due to banks' unpredictability and fraud risks. It provides a safety net, financial stability, and enhanced protection under FDIC limits, ensuring peace of mind and security.
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Financial services are cautious about adopting AI due to job loss fears, regulatory hurdles, and resistance. Only 6% of retail banks are prepared for AI at scale, despite its potential benefits. Banks face challenges transitioning to digital processes and ensuring AI accuracy and security. Compliance and ethical considerations are crucial for successful AI integration in the financial sector.
Senators urge Owners, VC's of Synapse to restore customers access to their money
A group of senators, led by U.S. Senator Sherrod Brown, demands Synapse's stakeholders to enable customer fund access. Concerns arise over a potential $65-$96 million shortfall in customer funds. Senators criticize the banking-as-a-service model, citing Synapse's bankruptcy as a warning. They call for industry collaboration to address systemic issues.
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