Both Wealthfront or Betterment are not banks but offer high-interest cash accounts that are FDIC insured. I've been curious what would happen if your money disappears from one of these high-interest cash accounts since they are technically not banks.
What Happens When Your Bank Isn't a Bank and Your Money Disappears?
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Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#12Earlier quoted context omitted.
But if the money is deposited in an FDIC-insured account and is stolen (by an external hacker or Mercury) isn't it insured against that loss?
No. The depositor has a relationship with Mercury. Mercury has relationships (directly or indirectly) with FDIC insured banks. Even if one could prove a direct link between the depositor and the FDIC insured bank (making the insurance relevant), the depositor has given Mercury the right to move money in and out of the FDIC insured accounts. Even if one could prove the money was illegally taken, FDIC insurance is for…
So then Mercury waving a big flag about how accounts are FDIC-insured is more about them being made whole if one of the banks they contract with goes under, not about ensuring that their customers are ultimately made whole?
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#13I'm considering using Mercury,* which is allegedly quite popular with startups. They do have all the usual KYC etc of a bank. Like the ones discussed in the article, Mercury also keeps customer funds in Evolve, among other banks (I guess they claim to spread your money around so you don't have more thank 250K in any one basket). So if I understand correctly, the problem is that I have no visibility to the back end, s…
Have you considered JPMC? FRB's tech portfolio and team is now part of them, and a number of SVB accounts ik of move there as well.
Do they offer the sort of cash management that is Mercury's hallmark?
Separately, I have heard a lot of bad things about Chase, and experienced some as well over the years. I'd be hesitant to open up an account there from a customer service perspective, although I assume the deposits would be safe at such a large mega-bank.
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#14Earlier quoted context omitted.
Have you considered JPMC? FRB's tech portfolio and team is now part of them, and a number of SVB accounts ik of move there as well.
Do they offer the sort of cash management that is Mercury's hallmark? Separately, I have heard a lot of bad things about Chase, and experienced some as well over the years. I'd be hesitant to open up an account there from a customer service perspective, although I assume the deposits would be safe at such a large mega-bank.
I can't speak for Chase. Most businesses ik are using JP Morgan Private Bank and Commercial Banking, and they should be able to use JPM Access
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#15I'm considering using Mercury,* which is allegedly quite popular with startups. They do have all the usual KYC etc of a bank. Like the ones discussed in the article, Mercury also keeps customer funds in Evolve, among other banks (I guess they claim to spread your money around so you don't have more thank 250K in any one basket). So if I understand correctly, the problem is that I have no visibility to the back end, s…
Have you considered JPMC? FRB's tech portfolio and team is now part of them, and a number of SVB accounts ik of move there as well.
JPMC bough First Republic and already I’m ready to leave. Fees are high and many, and there’s no direct relationship like there was with SVB or FRB. Just a call center.
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#16People conflate legal tender/money/currency/stock/accounting unit/medium of exchange/digital token/etc...
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#17Earlier quoted context omitted.
Have you considered JPMC? FRB's tech portfolio and team is now part of them, and a number of SVB accounts ik of move there as well.
JPMC bough First Republic and already I’m ready to leave. Fees are high and many, and there’s no direct relationship like there was with SVB or FRB. Just a call center.
Were you using FRB for private banking or commercial banking?
Private/Relationship banking might be lackluster with JPM depending on your account size.
Idk if I'd trust a non-FDIC insured bank and any bank that isn't Basel 1/2 compliant so most Neobanks seem too risky. They anyhow prefer to use state chartered banks which tend to be significantly more brittle than nationally chartered banks.
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#18Both Wealthfront or Betterment are not banks but offer high-interest cash accounts that are FDIC insured. I've been curious what would happen if your money disappears from one of these high-interest cash accounts since they are technically not banks.
Reading through Betterment's disclosure acknowledges the scenarios for potential loss. While the deposits are stored through their program banks, you're guaranteed up to $2mm in FDIC insurance. So if those banks go under, your money is as safe as it would be anywhere else.
What I did not know is that FDIC insurance doesn't apply while money is being _transferred_ between accounts (SIPC insurance apparently applies here).
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#19Earlier quoted context omitted.
But if the money is deposited in an FDIC-insured account and is stolen (by an external hacker or Mercury) isn't it insured against that loss?
No. The depositor has a relationship with Mercury. Mercury has relationships (directly or indirectly) with FDIC insured banks. Even if one could prove a direct link between the depositor and the FDIC insured bank (making the insurance relevant), the depositor has given Mercury the right to move money in and out of the FDIC insured accounts. Even if one could prove the money was illegally taken, FDIC insurance is for…
In my experience building a fintech on Evolve this description of the relationship is incorrect. My customers have accounts at Evolve directly and are FDIC insured.
As to what that insurance covers that is indeed a different question.
Re: What Happens When Your Bank Isn't a Bank and Your Money Disappears?
#20Earlier quoted context omitted.
No. The depositor has a relationship with Mercury. Mercury has relationships (directly or indirectly) with FDIC insured banks. Even if one could prove a direct link between the depositor and the FDIC insured bank (making the insurance relevant), the depositor has given Mercury the right to move money in and out of the FDIC insured accounts. Even if one could prove the money was illegally taken, FDIC insurance is for…
So then Mercury waving a big flag about how accounts are FDIC-insured is more about them being made whole if one of the banks they contract with goes under, not about ensuring that their customers are ultimately made whole?
The big risk is that Mercury goes out of business. This leaves the bank with money in Mercury accounts but no way to get back to customers. The funds may be considered to be the companies in bankruptcy, when means that customers would have to wait and may not get back all their money.