The Synapse collapse has revealed fintech's promise of safety as a mirage. More than 100,000 Americans with $265 million in deposits were locked from accounts.
For customers, fintech promised the best of both worlds: The innovation, ease of use and fun of the newest apps combined with the safety of government-backed accounts held at real banks.
Natasha Craft, a 25-year-old FedEx driver from Mishawaka, Indiana. She has been locked out of her Yotta banking account since May 11.driver from Mishawaka, Indiana, was busy getting her financial life in order and planning a wedding. Craft had her wages deposited directly into a Yotta account and used the startup's debit card to pay for all her expenses.
It had contracts with 100 fintech companies and 10 million end users, according to an April court filing. But many of the banks running BAAS businesses like Radius simply don't have the personnel or resources to do the job properly, Sanborn said. He shuttered most of the lender's fintech business as soon as he could, he says., a Washington, D.C.-based trade group representing large players including Block, PayPal and Chime, said in a statement, "It's inaccurate to claim that banks are the only trusted actors in financial services.
"For us, it just felt like they were a bank," the Oakland preschool owner said of her fintech provider, a tuition processor called. "You'd tell them what to bill, they bill it. They'd communicate with parents, and we get the money." The key difference with SVB is that none of the banks linked with Synapse have failed, and because of that, the regulator hasn't moved to help impacted users.
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