Yes. I guess the problem is that people aren’t reading the small text st the bottom of the website that says they’re not a bank

The “what is a bank” question is complicated, so “fintechs” have been operating in areas that are in some gray areas in between “definitely a bank” versus “definitely not a bank.”

At the most informal, you’ve got things like a roommate who collects everyone’s fair share of rent before sending one payment to the landlord, or a parent who keeps track of their kids’ virtual balances of what the kids are allowed to spend. These definitely aren’t banks.

Then you’ve got things like short term balances between people who deal with each other: an employer who keeps track of hours and pays the employee at the end of the pay period, a retail customer who has some store credit from a returned item, a contractor who periodically invoices a customer for work performed, etc. Despite the “credit” and “balances,” these aren’t bank accounts.

Some gray areas get a little bit more complicated. You have airline mileage and hotel point programs where the miles/points can be used to purchase goods and services, including sometimes those not even being offered by the business where the miles were accumulated.

Then you get into banking-like structures that might be, or might not be banks. Is it banking when you buy something on a periodic payment plan? What about when you put down a deposit to reserve a preorder for something you expect to buy when that product is released? Or give someone a gift card for a specific store? Does it matter if these programs are administered by third parties separate from the buyer or seller?

Even things like Apple Cash or PayPal or Venmo or CashApp perform functions that can be bank-like, or not really bank-like.

Fintechs have looked at the constantly updated rules of what they can or can’t do before needing to comply with certain banking regulations, and usually try to avoid accidentally triggering certain rules. And the rules don’t divide into just bank versus not bank, as many of the rules apply to non-banks that do certain things, and many of the rules don’t apply to even banks that stay out of certain product lines. So it’s not a binary yes or no, but a series of complicated areas where some are yes and some are no.

The big problem, where this Synapse bankruptcy is hurting people, is when people worked with an entity that provides certain services, who relied on the back end on a middleman that provides other services, and then the middleman fails. People operating in the gray areas are exposing themselves to systemic risks they might not fully understand.

The lie was WORSE than that.

A lot of the fintechs invovled actually told people their money was safe, because it was subject to “passthrough FDIC insurance”, because their money was ultimately put in an insured bank, and thus was safe.

Problem is that’s not how it actually worked, so basically everyone was straight up lied to.

Basically the whole thing is that the bank keeps track of who owns which account and how much money they have, so if they go bust, you just have the FDIC come in and use that data and write checks, basically.

Except since they’re disrupting banking, they also decided to just fucking not bother, and so even if there was going to be a payout, nobody has any fucking clue who has how much and in which bank said money was.

Absolute clusterfuck, and about what you’d expect from silly-con valley types.

Wow. Stochastic interest payouts. Another lamentable perverted contribution coming from irresponsible MBA schools

Why did you think they were FDIC insured?

People are desperate and Trump is unpredictable. They 'know' the Dems aren't helping them, so Trump might accidentally do it!

Example #1 is how he’s cozied up to crypto and talked about deregulating it.

The fact that every other article about his incoming administration is talking about their desire to dismantle the federal government, maybe.

Republicans deregulate banks every time they get into office.

America dumb.

That’s some kind of communist talk. In the Land of the Free you are your own man. No nanny state telling you what to do. You have options. You can be rich, you can put all your money into a scam bank, which is de facto sanctioned, (and die when they do a rug pull because you no longer have money for life saving, much less preventative care), or you can die. But this was your choice, and you can have a huge truck (N.B. the bank actually owns the truck, but in 5 years you’ll have it paid off).

🇺🇲🇺🇲🇺🇲

In reality I left the US years ago and don’t miss it, I do fear for friends though.