3 Tips for Securing Your Fintech Deposits

Innovative financial technology (fintech) companies are revolutionizing the way consumers manage their finances by offering alternatives to traditional banking. These fintech companies, also known as challenger banks or neobanks, are gaining popularity due to perks such as competitive rates, lower-cost products, and user-friendly mobile apps.

Before opening a savings or checking account with a fintech company, it is crucial to ensure that the accounts offered are federally insured. While these companies are not official banks themselves, they often partner with chartered banks that carry insurance through the Federal Deposit Insurance Corp. (FDIC) to provide federal insurance for deposits.

However, recent events have highlighted the importance of ensuring the safety of fintech deposits. In May 2024, thousands of consumer and business bank accounts were frozen when fintech company Synapse filed for Chapter 11 bankruptcy protection, leading to the abrupt shutdown of operations. Synapse acted as a middleman between partnering tech companies and FDIC-insured banks, causing disruptions for users of several fintech services associated with it.

To safeguard your deposits with fintech companies, it is essential to verify that your funds will be deposited in an FDIC-insured bank and understand the specific bank where they will be deposited. Some fintechs offer deposit accounts with partnering FDIC-insured banks, ensuring immediate coverage.

Examples of fintech companies that offer deposit accounts with FDIC insurance include Chime, Oportun, Betterment, and Wealthfront. These companies provide federally insured savings and checking accounts held at partnering banks, offering increased coverage limits for account holders.

To ensure the safety of your fintech deposits, it is recommended to follow these tips:

1. Confirm that your accounts are covered by FDIC insurance.
2. Verify that all your funds are insured, especially if depositing a significant amount.
3. Practice safe digital banking habits by using secure passwords, avoiding public Wi-Fi for account access, and setting up account alerts.

In conclusion, fintech companies offer attractive financial solutions, but it is essential to research and ensure that your deposits are federally insured to protect your funds in case of unforeseen events. By following these guidelines, you can make informed decisions about managing your finances with fintech companies.