Thousands of Americans Use Fintech, Lose Money They Thought Was Insured

The collapse of fintech middleman Synapse has left thousands of Americans without access to their savings, revealing the dangers of using fintech services that are not backed by traditional banks or credit unions. Customers, including those with Yotta, a fintech savings platform, believed their accounts were FDIC-insured through partner banks like Evolve. However, after Synapse’s bankruptcy, they learned that large sums—up to $96 million—were missing, and they would only receive a fraction of their deposits, if anything. The crisis highlights the risks of relying on fintechs for savings, as these companies often lack direct relationships with banks, leaving customers vulnerable when problems arise. Despite promises of FDIC insurance, the failure of non-bank fintechs like Synapse exposes a regulatory gap, as the FDIC and other regulators have made it clear that funds in such accounts may not be fully protected.

What is a fintech?

A fintech (short for financial technology) refers to companies or platforms that use technology to provide financial services or improve financial processes. These services can include a wide range of offerings, such as:

• Payments and money transfers (e.g., PayPal, Venmo, and mobile payment apps)
• Lending (e.g., peer-to-peer lending platforms or online loan services)
• Personal finance management (e.g., budgeting apps like Mint or YNAB)
• Investment platforms (e.g., robo-advisors like Betterment or platforms like Robinhood for trading stocks)
• Banking services (e.g., neobanks or online banks without physical branches, like Chime or N26)

How can you be sure your money is insured?

Your money is federally insured (up to certain limits) if it is kept at an NCUA insured credit union or FDIC insured bank. To avoid falling victim to a failed fintech, make sure the financial applications you used are the ones offered directly by your credit union or bank. Do not keep any balances with payment apps or other services that claim to be backed by a credit union or bank, but are not a credit union or bank.

Many credit unions, including TVFCU, offer advanced financial technology inside of their online and mobile banking. Inside of TVFCU’s YOUR$ you’ll find P2P payments, personal finance management, and other tools.

Related Links:
“‘I have no money’: Thousands of Americans see their savings vanish in Synapse fintech crisis” – CNBC.com
TVFCU YOUR$ Online & Mobile Banking
NCUA Insurance